The Impact of Business Process Outsourcing on Firm Performance

In recent years outsourcing in general and business process outsourcing in particular has become an important phenomenon. It is widely expected that business process outsourcing offers significant value to firms through lowered costs, increased ability to scale, enhanced flexibility and better access to knowledge and technological resources. However, there are only a few empirical studies investigating the relationships between business process outsourcing and firm performance. This paper attempts to examine the impact of business process outsourcing on the subsequent financial performance of outsourcing client firms. The results indicate that outsourcing intensity has a positive impact on firm productivity and a negative impact on profitability.