Outsourcing and Financial Performance: A Negative Curvilinear Effect

Masaaki Kotabe, Michael J. Mol

Research output: Contribution to journalJournal articleResearchpeer-review


This study asks how a firm's degree of outsourcing across all activities influences financial performance. We argue there is an optimal degree of outsourcing, where firms outsource some activities yet integrate others, and that deviations lower performance in a negatively curvilinear fashion. We find empirical support, using 1995 and 1998 data on a sample of manufacturing businesses in the Netherlands, and show that the steepness of the curve increases under conditions of high uncertainty. We show the magnitude of the uncertainty effect on performance outcomes through a post hoc scenario analysis. Thus we provide a specific, theoretically and empirically grounded prediction of how outsourcing affects performance with implications for theory and practice.
Original languageEnglish
JournalJournal of Purchasing & Supply Management
Issue number4
Pages (from-to)205-213
Publication statusPublished - Dec 2009
Externally publishedYes


  • Vertical Integration
  • The Netherlands
  • Outsourcing
  • Performance
  • Negative Curvilinear Effect
  • Manufacturing

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