Outsourcing strategies and their impact on financial performance in small manufacturing firms in Sweden
Journal article, 2015
Outsourcing, i.e., the strategic use of outside resources to perform activities traditionally handled by
internal staff and resources, have received increased attention in management practice around the world
over recent decades. However, even though the main goal of outsourcing must be assumed to be improved
financial performance, few researchers have been able to empirically establish this relationship.
Furthermore, because most studies have been focusing on large firms, there is also a lack of knowledge on
how small firms adopt outsourcing strategies. Therefore, the purpose of this study is to explore outsourcing
strategies among small manufacturing firms, and to test how these strategies can be linked to financial
performance. The study is based on questionnaire and financial data collected through a stratified sample
of 700 small (<50 employees) manufacturing firms in Sweden (with a response rate of 56 percent or 400
firms). Measures of outsourcing were collected from the questionnaire, and performance indicators were
collected from annual reports published one year later. We used Principal Component Analysis to identify
four outsourcing strategies: Back office activities, Primary activities, Accounting activities, and Support
activities. However, in line with previous research, multiple regressions did not reveal any significant
relationship between these strategies and financial performance.