The Impact of Outsourcing on the Performance of Small and Medium Enterprises in Vietnam

Abstract

This study examines the impact of using outsourced services on the performance of small and medium enterprises (SMEs) in Vietnam. The primary data used to analyze this study's main objectives were collected by the survey with the structured questionnaire and the expert interview with semi-structured interview guidelines. A total of 742 SMEs using outsourced services in the study area participated in the survey. The study employs Cronbach’s alpha test, exploratory factor analysis (EFA), confirmatory factor analysis (CFA), structural equation modelling (SEM), and multiple-group analysis for variables measurements and model testing. The study also investigates the influences of the degree of outsourcing on the enterprise’s performance. The results show that the degree of outsourcing has a low impact on financial performance, particularly ROS, ROE, and ROA (R2 = 0.013). Also, the degree of outsourcing has impacts on non-financial performance. The multiple-group analysis results indicate the different influences of the outsourcing degree on the different types of enterprises’ performance. The degree of outsourcing has a stronger impact on micro-enterprises' performance than the small and medium-sized enterprises. The commercial and service enterprises have higher performance when outsourcing than others. The outsourcing degree has a stronger impact on the performance of the enterprises that operated for more than nine years than others. The results show that there are different influences of the outsourcing degree on the performance of the enterprises that have different outsourcing situations. According to the findings, this study proposes the three main managerial implications to improve outsourcing effectively, such as strengthening outsourcing risk management, deciding on outsourcing depend on the enterprises’ characteristics, and managing the relationship between stakeholders.