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Outsourcing of Human Resources: The Case of Small- and Medium-Sized Enterprises

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  • Ingi Runar Edvardsson

    (School of Business, University of Iceland, 2102 Reykjavik, Iceland)

  • Guðmundur Kristján Óskarsson

    (Faculty of Business Administration, University of Akureyri, 2600 Akureyri, Iceland)

Abstract

The outsourcing of human resources has increased in recent years. As in other fields of management research, limited knowledge is available on outsourcing in small- and medium-sized enterprises (SMEs). The aim of this paper is to present a study on the outsourcing of human resources in Icelandic service SMEs in the period 2009–2018. Surveys were used to gather information on outsourcing, with the participation of 802 firms. The results show that three out of four firms have outsourced some activities, while only 21% have formulated a formal strategy for outsourcing. The main motives for outsourcing are accessing expertise and simplifying operations. Cost reduction comes in third place. SMEs tend to outsource human resources on a very limited scale, while 50% of firms outsource information technology and 39% outsource security services. Larger firms outsource human resources on a larger scale than smaller firms. Managers in companies that outsource human resources are more satisfied with many aspects of outsourcing compared to those managers who do not outsource those resources. Firms that outsource human resources also realise more actual cost reduction. Outsourcing in SMEs has little impact on employment, as 3% of firms lay off staff and 6% transfer staff to vendors. Larger firms and firms that outsource human resources are more likely to change their staff’s employment status after outsourcing.

Suggested Citation

  • Ingi Runar Edvardsson & Guðmundur Kristján Óskarsson, 2021. "Outsourcing of Human Resources: The Case of Small- and Medium-Sized Enterprises," Merits, MDPI, vol. 1(1), pages 1-11, May.
  • Handle: RePEc:gam:jmerit:v:1:y:2021:i:1:p:3-15:d:558175
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    References listed on IDEAS

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    3. Manjari Singh & Neharika Vohra, 2009. "Level of Formalisation of Human Resource Management in Small and Medium Enterprises in India," Journal of Entrepreneurship and Innovation in Emerging Economies, Entrepreneurship Development Institute of India, vol. 18(1), pages 95-116, March.
    4. Francine Schlosser & Andrew Templer & Denise Ghanam, 2006. "How Human Resource Outsourcing Affects Organizational Learning in the Knowledge Economy," Journal of Labor Research, Transaction Publishers, vol. 27(3), pages 291-303, June.
    5. Dante Di Gregorio & Martina Musteen & Douglas E Thomas, 2009. "Offshore outsourcing as a source of international competitiveness for SMEs," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 40(6), pages 969-988, August.
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    Cited by:

    1. Marcel Rolf Pfeifer, 2022. "Human Resources in Start-Ups: Expert Interviews with Managers on the Transition of Start-Ups from Academic to Private," Merits, MDPI, vol. 2(2), pages 1-20, May.

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