Performance Implications of Outsourcing in the Mobile Telecommunications Industry

We examine how outsourcing of a core service affects firm performance in the context of the mobile telephony industry. We develop hypotheses based on economies of scale, transaction costs, quality advantages from specialization, and bargaining power and test these using a ten-year panel with 50 mobile network operators outsourcing their network operations. We find that operators can decrease costs, increase revenues and improve their profitability in the long run by outsourcing mobile network operation services. This effect is stronger for small than for big operators.