OUTSOURCING OF HUMAN RESOURCE

INTRODUCTION
In recent years, organizations have outsourced an expanding variety of activities in
an attempt to improve service and product quality, reduce production cycle times,
lower costs, increase their focus on core competencies, and, in general, enhance
organizational effectiveness. Organizations appear to be focusing on a relatively
narrow set of functions and are contracting with outside suppliers to perform the
others. This trend toward a focus on activities key to competitive advantage and the
outsourcing of low-value-added activities has found enthusiastic proponents
among both scholars and practitioners (Quinn, 1992; Hirschhorn and Gilmore,
1992).
Despite the trend toward outsourcing, evidence of its performance effects is scarce.
Appealing arguments have made the case both for and against outsourcing as a
means of achieving long-run competitive advantage. On the one hand, by
outsourcing tasks to specialist organizations, organization may better focus on their
most value-creating activities, thereby maximizing the potential effectiveness of
those activities (Dess et al., 1995; Kotabe and Murray, 1990; Quinn, 1992). In
addition, as outsourcing increases, costs may decline, and investment in facilities,
equipment, and manpower can be reduced (Bettis et al., 1992). On the other hand,
anecdotal evidence suggests that increased reliance on outsourcing may lead to
reduced innovation (Kotabe, 1992), eventual competition from outsourcing
partners (Bettis et al., 1992), and reductions in control of the task in question.
Thus, the performance effects of outsourcing are uncertain. In the current study, we
attempt to shed light on the relationship between outsourcing and organization
performance by testing the relationship empirically.