Insourcing as a Respond to the Negative Effects of Outsourcing

The presentation focuses on the negative effects that may occur in the outsourcing process. As opposed to outsourcing author presents the concept of insourcing. The considerations about the motives of outsourcing and insourcing decision are conducted from the point of efficiency based on the transaction cost economics (TCE) and the resource-based theory (RBT). The foundation of transaction cost economics was presented by O. E. Williamson. He described his differed from the traditional approach in the following aspects “(1) examined economic organization through the lens of contract (rather than orthodox lens of choice), (2) described cognition in terms of bounded rationality, on which account all complex contracts are incomplete, (3) made provision for strategic behaviour (defection from the spirit of cooperation) when an outsourced good or service experienced disturbances for which the stakes are great, (4) treated adaptation as the main efficiency purpose of economic organization, and (5) distinguished between investments in generic assets and specific assets, where a bilateral dependency relation between supplier and buyer stages was ascribed to the latter. Taken together, the argument comes down to this: efficient intermediate product market exchange is usually well served by simple market contracting if the assets are generic; but the advantage shifts to hierarchy as bilateral dependency (and the resulting risk of costly maladaptations) builds up by reason of asset specificity and outlier disturbances.” (Williamson 2010, p.4.). The resource-based theory (RBT) emphasizes the role of important organisational resource that are expensive to copy by competitors and thus makes it the key factor of performance and competitive advantage. The resource based view of the firm is said to be evolved from the work of E. Penrose “The theory of the growth of the firm.” She focused on determining the way firms decide what to produce and at what price as well as she studied how and why a firm moves form one product and market to another. (McIvor, 2005, p.44). Of course resource-based perspective was present in literature long before Penrose book for example Barnard (1938), Selznick (1957). According to Barney to create a competitive advantage of the firm some of its resources should be characterized by the following properties: value (measured by the ability to seize opportunities and reduce risks in their environment), rarity (measured by the number of competitors who possess such resources), imitability (measured by the cost of duplication of resources by competitors). (Barney 1991). Negative effects of outsourcing can be considered both at the level of individual enterprises as well as on the level of the entire economy of the country (in the case of the widespread use of offshoring). Author summarizes the results of the latest research on outsourcing and insourcing in world literature. During presentation there will be presented the preliminary results of research project about diagnosis of the causes of insourcing, the most common insourced category of process and the scale of insourcing in Polish enterprises.