HEC Research Papers Series,
HEC Paris

Abstract: Despite the fact that vertical integration has been a key question of management studies for more than fifty years, we still do not have a unified, coherent view of outsourcing. In particular, multiple theoretical perspectives such as transaction cost economics, industrial organization, and strategy, could explain the outsourcing decision, but the implications of these different streams have neither been theoretically integrated, nor tested simultaneously. In an attempt to disentangle the various causes of outsourcing, we suggest three different rationales for outsourcing: cost reduction, focusing on core capabilities and importing knowledge into the firm. We develop several hypotheses, which we then test on secondary data on French small- and medium-sized enterprises. Results indicate that the learning rationale appears to be the strongest factor influencing the outsourcing decision. Some performance implications of this rationale are also suggested and tested.

Keywords: outsourcing; transaction cost economics; resource-based view; knowledge-based view

JEL-codes: M10; M11

28 pages, January 28, 2003

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