Probing into the issues of outsourcing among SMEs in Malaysia

Sustainable Outsourcing Decisions, Competitive Capabilities and Business Performance of Malaysian Manufacturing Smes: A Confirmatory Factor Analysis Approach

“…In Malaysia, many industries consider it more appropriate to outsource activities that are more labour-intensive to external vendors. Most manufacturing SMEs in the country are mainly motivated to outsource in peak periods in order to achieve cost-savings, access talent, improve quality, focus on core business, and enhance capability (Halim et al, 2012;Sonfield, 2014).…”

The Outsourcing Dilemma on Decision to Outsource Among Small and Medium Enterprises in Malaysia

“…Additionally, many service industries consider activities, such as food services and health insurance, peripheral functions that are more labour-intensive and thus more appropriate to be outsourced to external vendors (Sonfield, 2015). Factors that motivate SMEs to outsource generally can be traced to a qualitative study conducted by Halim et al (2012b) where they postulated that entrepreneurs are mainly motivated to outsource in the peak period, for cost saving, to access talent, to improve quality, to focus on core business and to enhance capability.…”

“…However, SME decisions to outsource or to increase the number of business processes to be outsourced are usually made on the basis of a management team's skill or personal interest rather than how it supports the whole organizations strategy (Halim et al, 2012b). Hence, this has sparked a notion on whether factors that are related to the entrepreneur itself, such as their characteristics, their strategic orientation and their perception towards the dynamism of the market, would have an impact on the degree of outsourcing, that is, how many business processes they are willing to outsource.…”

“…However, most of the studies were conducted on large organizations where their major aim was to redefine and reorganize their operations to achieve higher efficiency to gain better leverage for what they were already good at (Corbett, 2001). On the other hand, SMEs will opt for outsourcing due to lack of resources, such as expertise or equipment in certain business processes (Halim, Ahmad & Ramayah, 2012b). Thus, lack of knowledge on SMEs’ outsourcing behaviour is an interesting area to endeavour upon.…”

“…Hence, this has sparked a notion on whether factors that are related to the entrepreneur itself, such as their characteristics, their strategic orientation and their perception towards the dynamism of the market, would have an impact on the degree of outsourcing, that is, how many business processes they are willing to outsource. Moreover, SMEs are still in the process of establishing normal procedures (Nelson & Winter, 1982); hence, difficult in determining which functions to outsource (Arbaugh, 2003) causing SMEs to outsource mainly founder/top management personal interest and inclination towards outsourcing (Halim et al, 2012b). Therefore, the key research question in this study is ‘would individual factors, such as characteristics, strategic outlook and perception towards dynamism of the market, have an impact on the inclination of entrepreneurs to outsource more of their business process?’…”