Description
Recent trends suggest that business process outsourcing is an important contemporary phenomenon that is likely to have profound effects on organizations. This study examines whether there is a relationship between business process outsourcing and firm valuation and whether this relationship depends on the nature of the process outsourced and the location it is outsourced to. Using 375 public announcements of process outsourcing initiatives of Fortune 1000 firms we empirically test our hypotheses using an event study methodology. Our results indicate that business process outsourcing creates modest positive above normal returns. We also found that outsourcing knowledge intensive processes is more value adding than outsourcing labor intensive processes and offshore outsourcing is more value adding than onshore outsourcing. Interestingly, we found that among the options explored offshore outsourcing of knowledge intensive processes could reduce firm valuation.
Recommended Citation
Ravichandran, T, "BUSINESS PROCESS OUTSOURCING AND MARKET VALUE OF FIRMS" (2015). AMCIS 2015 Proceedings. 5.
https://aisel.aisnet.org/amcis2015/General/GeneralPresentations/5
BUSINESS PROCESS OUTSOURCING AND MARKET VALUE OF FIRMS
Recent trends suggest that business process outsourcing is an important contemporary phenomenon that is likely to have profound effects on organizations. This study examines whether there is a relationship between business process outsourcing and firm valuation and whether this relationship depends on the nature of the process outsourced and the location it is outsourced to. Using 375 public announcements of process outsourcing initiatives of Fortune 1000 firms we empirically test our hypotheses using an event study methodology. Our results indicate that business process outsourcing creates modest positive above normal returns. We also found that outsourcing knowledge intensive processes is more value adding than outsourcing labor intensive processes and offshore outsourcing is more value adding than onshore outsourcing. Interestingly, we found that among the options explored offshore outsourcing of knowledge intensive processes could reduce firm valuation.