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Business service outsourcing in manufacturing firms: an event study

Andreas Eggert (Marketing Department, Faculty of Business Administration and Economics, University of Paderborn, Paderborn, Germany)
Eva Böhm (Marketing Department, Faculty of Business Administration and Economics, University of Paderborn, Paderborn, Germany)
Christina Cramer (Marketing Department, Faculty of Business Administration and Economics, University of Paderborn, Paderborn, Germany)

Journal of Service Management

ISSN: 1757-5818

Article publication date: 19 June 2017

Abstract

Purpose

Many manufacturing firms entrust partners to provide services on their behalf. However, it is not clear whether and when firms can capture the potential value advantages of outsourcing business services. The purpose of this paper is to investigate the effects of different types of business service outsourcing on firm value.

Design/methodology/approach

The paper uses event study methodology to estimate the impact of business service outsourcing announcements on abnormal returns of publicly traded manufacturing companies in Europe.

Findings

External service outsourcing that directly affects the company’s customers leads to more favorable outcomes than internal service outsourcing. This effect is contingent on the strategic outsourcing intention, the service’s reliance on technology, and the choice of the outsourcing partner.

Research limitations/implications

Findings show that firm value depends critically on the service value it delivers to customers. Future research could explore further contingency variables, and investigate the role of service outsourcing networks and relationships.

Practical implications

The insights of this study help managers to decide why, how, and to whom they should outsource their business services, as well as how to justify their outsourcing decisions, and how to communicate them toward the financial markets.

Originality/value

This research sheds light on the value implications of outsourcing decisions. Two types of business service outsourcing are distinguished, namely, internal and external. Furthermore, the study enhances our understanding of a contingency perspective on service outsourcing decisions.

Keywords

Acknowledgements

This paper forms part of a special section colloqium on relationship marketing.

An earlier version of this paper was presented at the 24th International Colloquium on Relationship Marketing (ICRM) held in Toulouse, France from September 6, 2016 to September 8, 2016. Dr Andreas Munzel, Associate Professor of Marketing at the IAE Toulouse School of Management, Université Toulouse 1 Capitole, France served as the Special Section Guest Editor for this paper.

Citation

Eggert, A., Böhm, E. and Cramer, C. (2017), "Business service outsourcing in manufacturing firms: an event study", Journal of Service Management, Vol. 28 No. 3, pp. 476-498. https://doi.org/10.1108/JOSM-11-2016-0306

Publisher

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Emerald Publishing Limited

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