Determinants of ICT outsourcing among the locally-owned manufacturers in Malaysia

Abstract

Purpose This paper aims to examine the level of information and communication technology (ICT) outsourcing and its determinants in the Malaysian locally owned manufacturing firms. Drawing on the transaction cost theory and the resource-based theory, four determinants – asset specificity, uncertainty, business skills and technical skills – were hypothesized to influence ICT outsourcing. Design/methodology/approach Data were collected using a questionnaire survey from 104 manufacturing firms listed on the Directory of Federation of Malaysian Manufacturers. Data were then analyzed using R package partial least squares path modeling. Findings The study reveals that slightly over two-thirds (68 per cent) of the surveyed manufacturers either fully or partially outsourced their ICT services. Asset specificity and uncertainty are found to be positively related to the level of ICT outsourcing, which contradict the prediction of the transaction cost theory. On the other hand, business skills and technical skills are not significantly related to the level of ICT outsourcing, which also conflict the resource-based arguments. Research limitations/implications The small sample size would not be able to make meaningful conclusion for the population; the small R2 value indicates that other important determinants of ICT outsourcing were not tested in this study, and the transaction cost theory and the resource-based theory do not adequately predict the level of ICT outsourcing in the Malaysian locally owned manufacturers. Originality/value The study serves as one of the first studies that tested the determinants of ICT outsourcing using the transaction cost theory and the resource-based theory in locally owned manufacturing firms of a developing country.

Product development sourcing over technology life-cycle

“…Some critique has also been presented, McIvor (2009) argues that the resource-based view alone cannot fully explain the complexities of outsourcing. Also, resource-based theory is not seen to adequately predict the level of outsourcing in all cases (Yap et al, 2016).…”

Drivers and risk of business process outsourcing in South African mobile telecommunication industry

“…As a result, when enterprises lack the resources and capabilities to achieve the desired result, business tasks of mobile telecom companies should be outsourced to third parties (Yuan et al, 2020). RBV takes a more "internal" approach, arguing that "competitive advantage can be acquired by effectively exploiting precious, uncommon, imperfectly imitable, and non-substitutable physical, technological, and human resources" (Yap et al, 2016). "Activities in which the firm maintains a superior resource position or capabilities are likely to be retained in-house, whereas those for which resource position or capability is weak are candidates for outsourcing" (Yuan et al, 2020), hence this research utilized this theory in that the mobile telecom companies can adopt in its BPO endeavour.…”

Outsourcing and public universities performance in Nigeria, the mediating effect of trust

“…(Lilly et al , 2005; Bolat and Yilmaz, 2008). According to Yap et al (2016) outsourcing can lead to improved performance standards. A well-managed outsourcing results in improved performance (Lacey and Blumberg, 2005).…”