Outsourcing and insourcing of organizational activities: the role of outsourcing process mechanisms

Abstract

The decision to outsource organizational activities is studied widely, but research on the aftermath of outsourcing decisions and the insourcing of outsourced activities is scarce. We study outsourcing decision as a process not an event, and investigate the influences of organizational mechanisms on its sustainability. We argue that organizational learning from the outsourcing decision process could over time result in competencies that would enhance the sustainability of outsourcing decisions. We examine outsourcing and insourcing processes longitudinally among 64 public services in 1,650 local governments across 25 years. The results from regression analysis generally support our theory that the outsourcing process mechanisms, especially the mechanisms associated with implementing the outsourcing decision, predict the occurrence of insourcing. We discuss the implications of our organizational behavioural study of outsourcing decisions for future research on outsourcing and insourcing of public services.

Reconciling agile frameworks with IT sourcing through an IT sourcing dimensions map and structured decision-making

“…Configuration of ITS strategies is a form of strategic decision-making (Varajão et al 2017;Damanpour et al 2019). The situational factors and the dimensions of ITS decisions are two elements of strategic decision-making (SDM) (Rajagopalan et al 1997).…”

Government choice between contract termination and contract expiration in re-municipalization: a case of historical recurrence?

“…This is an important gap in the literature because policy implementation can influence outcomes such as the sustainability (i.e. how long they last) of decisions such as contracting in and contracting out (Albalate Bel and Reeves, 2021;Damanpour, Magelssen and Walker, 2020).…”

Does insourcing of processes pay off?

“…Beaumont and Sohal (2004) have adopted the following definition of insourcing: applying outsourcing's discipline to internal suppliers, often having them compete with external suppliers. According to Damanpour et al (2020), insourcing is a managerial decision to abandon outsourcing and bring the production of the products or services back in-house. For S. Chakrabarty, insourcing means that the service provider is a client entity (Chakrabarty, 2006), which equates it with the concept of in-house production.…”

“…In the first case, insourcing is about reversing the effects of outsourcing (Gray et al , 2013; Cabral et al , 2014; Foerstl et al , 2016). In our opinion, the reversing decision should be referred to more precisely as “backsourcing” (Hirschheim and Lacity, 2000; McLaughlin and Peppard, 2006; Nicholas-Donald and Osei-Bryson, 2017; Thakur-Wernz, 2019; Damanpour et al , 2020). In the second approach (adopted in this article), insourcing refers to the inclusion of processes performed outside the organisation without the requirement of their prior implementation in the organisation (Altmann, 2006; Muhic and Johansson, 2014).…”

“…Insourcing is defined as a project whose aim is to include processes that have been carried out so far outside the borders of the organisation. Insourcing as an economic phenomenon has been the subject of research for many years (Hirschheim and Lacity, 2000; Schniederjans and Zuckweiler, 2004; Caputo and Palumbo, 2005; Brege et al , 2010; Singhania and Gupta, 2014; Chaudhury et al , 2015; Tate and Bals, 2017; Ozturk, 2018; Silva et al , 2019; Damanpour et al , 2020; Nujen et al , 2019). Most often, these studies are based on case studies or theoretical models without empirical verification of the financial consequences of insourcing on a larger group of companies.…”