Human Resource Outsourcing: Long Term Operating Performance Effects From The Providers Perspective

Abstract

Human resource (HR) outsourcing research has primarily focused on the client with little attention paid to the service provider. As an initial step in understanding this important stakeholder in the HR outsourcing relationship, this study focuses on the financial performance of HR service firms that publicly announce outsourcing contracts. From the provider’s perspective, we investigate firm performance changes subsequent to outsourcing contract announcements, using a sample of 94 publicly available press releases. Our tests show that in the long term, small HR service providers contracted by large client firms experience improvements in operating profitability and margins.