The outsourcing practice among small knowledge-intensive service firms

Abstract

PurposeThis paper aims to present findings on outsourcing practices in small service firms in Iceland, where the prime focus is on knowledge-intensive service firms.Design/methodology/approachTo gain information on the scope and reason for outsourcing, telephone and online surveys were used. In total, 802 firms participated in the surveys, which were conducted in the period 2009-2018.FindingsThe results show that knowledge-intensive firms outsource far more than other service firms and are also more likely to have an outsourcing strategy. The grounds for increased outsourcing are cost reduction and strategic reasons, such as a focus on core competency and the search for external knowledge. In comparison with other firms, knowledge-intensive firms are increasingly outsourcing cleaning, security services, canteen and transportation, IT processes, human resource management, training and consulting. Additionally, managers of these firms select suppliers more on the basis of cost and quality. They also realize more cost savings as a consequence of outsourcing. Outsourcing had a very limited effect on employment in the firms, while cost reduction was achieved in 48.3 per cent of the firms involved.Research limitations/implicationsThe findings are in line with the resource-based theory and, interestingly, this is not limited to knowledge-based firms, but to a large portion of service firms as well.Originality/valueThis is the first in-depth study on outsourcing patterns in knowledge-intensive firms, which uses theoretical classification in empirical analysis.