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- W2979159076 abstract "ABSTRACT Outsourcing permits firms to concentrate their resources and efforts on a few critical functions. The outsourcing of core functions has been identified with improved firm performance. This study examines the relationships between the use of outsourcing activities, firm size, and performance in 93 new computer manufacturing firms. The study concentrates upon the outsourcing of three core functions: marketing, research and development, and manufacturing. The study provides empirical support for the recent anecdotal evidence which suggests that higher performance is associated with the use of outsourcing. INTRODUCTION To improve performance, firms, both large and small, are entering into strategic alliances and interorganizational relationships (Dollinger & Golden, 1992). One such relationship is outsourcing. Outsourcing is described as the act of subcontracting out all or parts of the firm's functions to an external party. It can cover activities which are normally essential core functions-research and development (RD Brokaw, 1993). The adoption of outsourcing allows newer firms to focus their limited resources on the venture's core competencies. The concentration of resources and energies is intended to improve the firm's performance. This study explores the relationships between the use of outsourcing activities and performance in newer computer firms. The researcher's goal is to provide empirical support for the anecdotal evidence suggesting that higher performance is associated with the use of outsourcing. The study focuses on whether a firm's size moderates the relationship between performance and the outsourcing of three core functions: marketing, research and development, and manufacturing. PRIOR RESEARCH Performance has been identified as an underlying determinant of outsourcing (Welch & Nayak, 1992: Bettis, Bradley & Hamel, 1992). The decision to outsource a firm's core functions in an effort to improve performance is consistent with the transaction cost framework (Oliver, 1990). Transaction cost theory is driven by cost minimization. It questions whether a function (e.g., marketing) is more efficiently performed within a firm (vertical integration/ internal hierarchies) or across independent entities (outsourcing/market transactions) (Anderson, 1985). A transaction's critical dimensions under the theory are uncertainty or unpredictability of both external and internal environments, frequency of recurrence, and the requirement of durable, transaction-specific investments, whether physical or human assets (Williamson, 1981). For example, where environment uncertainty exists (performance cannot easily be evaluated), Williamson (1981) argues that firms will enter into market transactions. Under transaction cost theory, transactions are assumed to occur under bounded rationality-under some degree of uncertainty and where some actors are opportunistic, that is, they cheat. Initially, external market transactions are generally viewed as more efficient (Williamson, 1981). The motivation to externalize a transaction is clear when internal capability is lacking. Firms will internalize functions if the skills exchanged are critical to an organization's success and involve a high degree of asset-specificity (Williamson, 1975; Powell & Brantley, 1992). Where asset specificity is great, the parties will make a special effort to design an exchange that has good continuity properties (Wiiliamson, 1981). Several authors have attempted to explain the widespread use of various outsourcing arrangements and the relationship between outsourcing and performance (Borys & Jemison, 1989; Galaskiewicz, 1985; Oliver, 1990). …" @default.
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- W2979159076 title "The Role of Firm Size in Successful Outsourcing: A Study of New Computer Firms" @default.
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