| If we divide current outsourcing research into three areas: outsourcing decision-oriented research, outsourcing process-oriented research and outsourcing result-oriented research, we will find there is an asymmetric pattern. Within the last decade, most academic studies have focused on understanding outsourcing decision determinants and outsourcing process control. While contracting out is now broadly understood to be an attractive option, its specific impact on firm's performance and value, i.e., outsourcing result, has not yet been well confirmed by research. When researchers look to measure the financial impact, they have usually been forced to rely on managers' estimates in place of tangible metrics. As a result, much of the evidence that we have come across is anecdotal and case study oriented, and often based on non-financial metrics.; These anecdotal accounts of outsourcing effects raise some fundamental questions for empirical research. Because the impact of outsourcing on operational performance metrics and value of the contract-granting firm has not been investigated, this study is concerned with empirically examining the impact of outsourcing on firm's performance and value. The results are based on a sample of 51 publicly traded firms that outsourced parts of their operations between 1990 and 2002. We use publicly available accounting data to test for changes in operating performance and abnormal return rates of stock that result from outsourcing decisions. Operating performance and value are examined over a 4-quarter period after the outsourcing announcement.; This research makes several contributions to both practice and theory. First, it is one of the first empirical studies to examine the outsourcing impact on firms' performance and value by audited financial data rather than subjective perceptual measures. Second, we offer the first empirical study to compare the differences between outsourcing firms and their most closely matched non-outsourcing firms. Very few studies have focused on testing outsourcing impact on firms' performance and value by employing one-by-one control pairs. Third, this is the first study about the influence of outsourcing contract value and term. |
