The Performance Consequences of Manufacturing Outsourcing: Review and Recommendations for Future Research

Many manufacturing firms (e.g. Apple and Nike) now outsource some or all of their manufacturing activities to independent suppliers rather than con- tinuing to undertake them in-house. Clearly these firms perceive this exter- nalisation of production to be a performance-enhancing strategy, but what are the performance consequences in practice? In this chapter, we review and critique the extant academic literature on the performance consequences of manufacturing outsourcing, and note that the empirical findings have yielded mixed results. We argue that outsourcing has potential impacts upon a num- ber of ‘performance’ outcomes, including inter alia financial performance, productivity/efficiency, sales/market share, costs of production, business performance and innovation. We further argue that many of the empirical studies have flawed designs, and make a series of methodological recommen- dations to guide future empirical work.