| This study is an empirical comparison of risk-related, cost-related, and skills-related explanations for managerial decisions to seek outside suppliers, the make-or-buy decision. Survey methodologies are used to collect data from key respondents, usually top human resources executives, on five HR activities (i.e., payroll, benefits, training, HRIS, and recruitment). Analysis is conducted using confirmatory factor analysis (LISREL). This research contributes to our understanding of organizations by simultaneously considering three main theoretical explanations and several alternative explanations for outsourcing practices, investigating decisions about the degree of outside vs. inside resources rather than a simple categorical decision to make-or-buy, demonstrating that differing make-or-buy decisions are not explained by a single calculus, and expanding the study of make-or-buy decisions into service areas of the firm. The findings demonstrate that different explanations for outsourcing levels are operative in each HR activity surveyed. Not a single explanation for the make-or-buy decision and outsourcing levels is universally applicable, instead explanations are related to characteristics of the activity in question. Multiple organization theories applied in combination provide greater explanatory value. |
