OUTSOURCING INTENSITY, STRATEGY, AND GROWTH IN ENTREPRENEURIAL FIRMS

Abstract

This study examines the relationship between outsourcing practices, firm strategy and growth in SMEs. The sample for this study was the Entrepreneur of the Year (EOY) database co-developed by the Kauffman Center for Entrepreneurial Leadership and Ernst & Young. I found that while 83% of the firms engaged in some outsourcing practice, 71.5% of the firms outsourced three or fewer activities. Differing activities were significantly associated with growth depending on whether firm growth was measured in relative or absolute terms, suggesting that outsourcing preferences may be highly influenced by firm size. The results of this study suggest that while outsourcing is commonly practiced among high-performing SMEs, it is generally done to allow the firm to focus on its core activities rather than directly supporting their growth strategies.