The impact of SMEs’ outsourcing partner capabilities on partnerships and firm performance: With moderating effect of outsourcing purpose
Authors:   Asia-Europe Perspective Association, Chae Sung-Il , Lee Dong-Myung , Chen Lu 
Published: December 2024

Domestic small and medium-sized companies have redirected their management strategy from quantity growth to quality growth as they went through the financial crisis in 1997. In particular, small and medium-sized companies face difficulty pursuing innovation and transformation by means of independent management style as they have done in the past in such radical environmental changes. In such situation, in order to flexibly respond to internal innovation and changes in the external environment, it is necessary, by using external resources, to take advantage of outsourcing in order to reduce costs and improve organizational flexibility and company performance. When researching the precedent studies, the studies of outsourcing made between the large company and small, medium-sized company are apparent and ongoing, whereas a lack consists in the study of those made between the same small and medium-sized companies even though they take up the absolute majority of the market.
The purpose of this study is to select small and medium-sized companies utilizing outsourcing between the same company size segment and study the plans to increase small and medium-sized companies’ outsourcing partner capabilities, their establishment of a cooperative relationship with the outsourcing partners, and their performance enhancement by outsourcing field. The hypothesis of the study is to analyze the direct and indirect impact of partner capability on company performance, focusing on outsourcing partnership. In addition, the study intends to analyze the impact of partner capability on the partnership by outsourcing purpose.
The analysis method was made by empirical testing, using structural equation modeling with 356 questionnaires collected from workers in managing level or higher who work in small and medium-sized companies that utilize outsourcing with the company on the same size segment through direct visitation, e-mail, and fax. Company selections were made via Korea Federation of Small and Medium-sized Businesses company list.
The results of the study are as follows: First, of the outsourcing partner capability, the financial capability was shown to have a significant impact on outsourcing management performance, with product and service capability having a significant impact on outsourcing satisfaction; organization capability was shown not to have a significant impact on company performance. Second, the outsourcing partner’s organization capability, financial capability, product and service capability were shown to have a significant impact on the partnership’s mutual binding, mutual trust, and mutual dependence. Third, the mutual dependence of the partnership was shown to have a significant impact on company performance, and mutual trust on outsourcing satisfaction, however, mutual binding was shown not to have a significant impact on company performance. Fourth, the mutual dependence of partnership was shown to play a mediating role between partner capability and company performance, with mutual trust playing a mediating role between organization capability and product and service capability in the outsourcing satisfaction. However, mutual binding was shown not to play a mediating role. Fifth, in the difference of the impact of partner capability on the partnership by outsourcing purpose, only in the cost reduction group did the impact of the organization capability on the mutual binding show a significant difference, with the impact of financial capability on mutual binding showing significant difference only in resource acquisition group.