Outsourcing accounting functions -measuring benefits, impact on capabilities and firm performance
1University of Oulu, Oulu Business School, Department of Marketing, Marketing
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Outsourcing has become a common strategy for companies during the past decades and the goals of outsourcing have changed from only seeking cost savings to more strategic objectives. The existing literature on outsourcing has grown as well but the results of outsourcing is a rather under researched area. The existing literature lacks comprehensive ways for measuring the results of outsourcing. Moreover, despite being one of the most commonly outsourced activities, the outsourcing of accounting functions is lacking empirical research. This research sheds light to the results of outsourcing accounting functions by developing a structured measurement model based on the existing literature. The model is developed approaching the outsourcing phenomenon from three perspectives. First, the potential benefits of outsourcing are reviewed, and the measurement scales are developed and structured into two factors. Second, a two-factor structure and measurement scales are developed for the impact that outsourcing has on the development of company’s competitive capabilities. Lastly, the firm performance approach is adopted to the outsourcing context and a structure of five factors is established. Also the possible correlations between the assumed factors are investigated. The theorized measurement model is empirically tested with survey data gathered from Finnish companies by carrying out a confirmatory factor analysis. The empirical part of the research connects the existing literature to the outsourcing of accounting functions. Based on the analysis no need to make changes to the model was found considering the potential benefits of outsourcing and the impact outsourcing has on competitive capabilities. This means that the theorized benefits of outsourcing and the impact it has on competitive capabilities seems to be in line with earlier studies in the context of this research. The variables measuring benefits form two distinct factors, business benefits and organizational benefits. Similarly, the variables measuring the impact on competitive capabilities form two factors, impact on internal competitive capabilities and external competitive capabilities. The firm performance measurement part of the model needed some changes. Based on the statistical and conceptual considerations two factors, external business performance and stakeholder performance is excluded from the model. They do not seem to be valid factors for measuring firm performance when outsourcing accounting functions. Based on the analysis, some variables were excluded in two other factors, internal business performance and organizational performance. With these changes, these factors seem to be valid for measuring firm performance in the context of this study. The fifth firm performance factor, innovation performance, was a valid factor as such. As theorized, the benefit and impact factors are correlated with each other. The impact factors seem to be correlated only with innovation performance but not with organizational or internal business performance. However, organizational performance and internal business performance are correlated with innovation performance. Based on these results, it seems that the benefits of outsourcing accounting functions are connected to innovation performance through the development of competitive capabilities, which is in turn connected the other avenues of firm performance. The model developed can be used to measure the results of outsourcing accounting functions. It also forms a good basis for structural equation modeling that can be used to test causality between the factors.
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