Outsourcing in Knowledge-Based Service Firms

This paper reports on empirical work recently conducted on outsourcing among knowledge-based and other service firms in Iceland. The results show that knowledge-based firms outsource on a larger scale and more human resource functions than other service firms. However, they do not have a more strategic vision towards outsourcing, nor do they outsource more low knowledge-based activities than other firms. The study gives support to the resource-based view of the firm, and is in line with former studies of knowledge-based firms. The firms in the survey tend to keep their core competencies and employees in-house, and at the same time they outsource other functions that they consider non-core, such as peripheral and administrative tasks, or IT that requires technical specialization. The more innovative firms rely on outsourcing from best in class suppliers regarding training and counselling. The contribution of this study to the theory of outsourcing is that the non-routine tacit knowledge base related to firms’ core competencies is not limited to knowledge-based firms, but to a large portion of service firms as well.