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Human resource outsourcing: Market and operating performance effects of administrative HR functions

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  • Butler, Maureen G.
  • Callahan, Carolyn M.

Abstract

Using event study methodology and two-stage regression analysis on a sample of firms announcing human resource outsourcing (HRO) contracts, this study tests the association between administrative HRO and firm-level capital market and long run operating performance, with archival financial data controlling for endogeneity and outsourcing decision optimality. The results demonstrate that the equity capital market responds positively to client firms announcing administrative HRO, particularly service firms and those outsourcing transactional HR tasks. Additional statistical analysis shows that suboptimal outsourcing is negatively associated with long run operating performance measured as return on assets and operating return on assets. This study contributes to outsourcing literature by more precisely quantifying outsourcing performance through archival financial data and employing capital market empirical tests. Further, it controls for outsourcing decision optimality in examining long run operating performance effects. This research focuses on HR, a critical function within the firm and value enhancing to the firm.

Suggested Citation

  • Butler, Maureen G. & Callahan, Carolyn M., 2014. "Human resource outsourcing: Market and operating performance effects of administrative HR functions," Journal of Business Research, Elsevier, vol. 67(2), pages 218-224.
    • Handle: RePEc:eee:jbrese:v:67:y:2014:i:2:p:218-224
    DOI: 10.1016/j.jbusres.2012.09.026
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    2. Mathieu Floquet & Pierre Labardin, 2014. "Les déterminants de la sous-traitance de la fonction comptable dans les entreprises françaises," Post-Print hal-01899426, HAL.
    3. Carlos Sanchís-Pedregosa & María-del-Mar Gonzalez-Zamora & María-José Palacín-Sánchez, 2018. "Outsource Services to Improve Financial Performance: Is There a Limit?," Global Business Review, International Management Institute, vol. 19(1), pages 21-31, February.
    4. Dahlgrün, Philipp W. & Bausch, Andreas, 2019. "How Opportunistic Culture Affects Financial Performance in Outsourcing Relationships: A Meta-Analysis," Journal of International Management, Elsevier, vol. 25(1), pages 81-100.
    5. Thakur-Wernz, Pooja & Bruyaka, Olga & Contractor, Farok, 2022. "Sourcing portfolio diversity in new product development: Antecedents and performance implications," Journal of Business Research, Elsevier, vol. 150(C), pages 179-193.
    6. Walid Mohamed, 2019. "Employees' Outsourcing Perceptions and Satisfaction: The Case of Libya Oil Company," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(3), pages 84-95.

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