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Effect of outsourcing strategies on the performance of small and medium scale enterprises (SMEs)

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  • John I. Agburu

    (Benue State University)

  • Nyianshima Calvin Anza

    (Federal University)

  • Akuraun Shadrach Iyortsuun

    (Federal University)

Abstract

Several organizations have embarked on outsourcing strategies over the years but many still suffer in terms of their goal achievement; some have experienced low productivity both in terms of quality and quantity, their profitability has not been stable, and their capacities are grossly underutilized. This research work determined the effect of outsourcing strategies (back office activities, primary activities, accounting activities and supporting activities) on the performance of Small and Medium Scale Enterprises (SMEs). Survey research design was adopted in Benue State, Nigeria. Stratified random sampling technique was used in selecting respondents for a primary source data gotten through a well-designed and self-administered questionnaire. Also, secondary data was sourced from the financial records of ten (10) selected SMEs. The variables were statistically analyzed using multiple regression technique. At the end of the research, the study found that; outsourcing of back office activities (such as bookkeeping, payroll, billing, order processing, payment processing, cleaning services, security services and other administrative activities); outsourcing of primary activities (such as manufacturing, purchases, warehousing, Sales force and customer service); outsourcing of Supporting activities(such as shipping, IT services/system, training, advertising, legal services, transport services, public relations) has a significant effect on organizational profitability of SMEs whereas, outsourcing of accounting activities(such as financial reporting, tax processing) has no significant effect on performance of SMEs. This study therefore recommended that SMEs should embark more on outsourcing strategies to attain the benefits of cost savings/restructuring which results in better customer service at profit; also, outsourcing process management through follow up steps like effective communication and monitoring should be employed and taken seriously to better reap the benefits of this maintenance/growth strategy. Also, SMEs should ensure that, the costs of managing the outsourcing process is not greater than the benefits generated by the outsourcing program.

Suggested Citation

  • John I. Agburu & Nyianshima Calvin Anza & Akuraun Shadrach Iyortsuun, 2017. "Effect of outsourcing strategies on the performance of small and medium scale enterprises (SMEs)," Journal of Global Entrepreneurship Research, Springer;UNESCO Chair in Entrepreneurship, vol. 7(1), pages 1-34, December.
    • Handle: RePEc:spr:jglont:v:7:y:2017:i:1:d:10.1186_s40497-017-0084-0
    DOI: 10.1186/s40497-017-0084-0
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    References listed on IDEAS

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    1. Gilley, K. Matthew & Greer, Charles R. & Rasheed, Abdul A., 2004. "Human resource outsourcing and organizational performance in manufacturing firms," Journal of Business Research, Elsevier, vol. 57(3), pages 232-240, March.
    2. Bustinza, O.F. & Arias-Aranda, D. & Gutierrez-Gutierrez, L., 2010. "Outsourcing, competitive capabilities and performance: an empirical study in service firms," International Journal of Production Economics, Elsevier, vol. 126(2), pages 276-288, August.
    3. Anders Isaksson & Björn Lantz, 2015. "Outsourcing Strategies And Their Impact On Financial Performance In Small Manufacturing Firms In Sweden," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 9(4), pages 11-20.
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    Cited by:

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    2. Youtang Zhang & Eshetu Yesuf Ayele, 2022. "Factors Affecting Small and Micro Enterprise Performance with the Mediating Effect of Government Support: Evidence from the Amhara Region Ethiopia," Sustainability, MDPI, vol. 14(11), pages 1-20, June.
    3. Kafigi Jeje, 2020. "Risk-Taking and Performance of Small and Medium-Sized Enterprises: Lessons from Tanzanian Bakeries," Journal of Economics and Behavioral Studies, AMH International, vol. 12(3), pages 1-22.
    4. Dinh Cong Thanh & Le Tan Nghiem & Nguyen Hong Gam & Pham Le Hong Nhung, 2022. "Study the impact of labor outsourcing on the financial performance of small and medium enterprises in Mekong Delta, Vietnam," HO CHI MINH CITY OPEN UNIVERSITY JOURNAL OF SCIENCE - ECONOMICS AND BUSINESS ADMINISTRATION, HO CHI MINH CITY OPEN UNIVERSITY JOURNAL OF SCIENCE, HO CHI MINH CITY OPEN UNIVERSITY, vol. 12(1), pages 67-83.
    5. Ebrahim Endris & Andualem Kassegn, 2023. "Profitability of Agricultural Micro and Small-Scale Enterprise in North Wollo Zone, Amhara Regional State, Ethiopia," SAGE Open, , vol. 13(2), pages 21582440231, May.
    6. Martin Mabunda Baluku & Julius Fred Kikooma & Edward Bantu & Kathleen Otto, 2018. "Psychological capital and entrepreneurial outcomes: the moderating role of social competences of owners of micro-enterprises in East Africa," Journal of Global Entrepreneurship Research, Springer;UNESCO Chair in Entrepreneurship, vol. 8(1), pages 1-23, December.
    7. Flora Kulembayeva & Aruzhan Seitkaziyeva & Rakymzhan Yelshibayev, 2022. "Economic Efficiency of Outsourcing Business Models: A Comparative Assessment," Global Journal of Flexible Systems Management, Springer;Global Institute of Flexible Systems Management, vol. 23(1), pages 75-88, March.

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