If the present state of the literature teaches us anything, it must be that there is a variety of activities that can be outsourced. The challenge I will set myself in this chapter is to find a common denominator for the outsourcing of various activities, by focusing on the shared space, or relatedness, between them and providing a perspective that helps to discern how the outsourcing of various activities has an impact on overall firm performance. I will start this chapter by identifying what I believe to be a major weakness of the outsourcing literature, its inability to predict performance at the firm level based on overall outsourcing levels. I will then propose the construct of “outsourceability,” defined as the degree to which it is beneficial to outsource a given activity. Since there are differing degrees of outsourceability across activities, it makes sense to outsource some of these activities while integrating others into the firm. Firms that get all their outsourcing decisions right are in a sense optimizing their performance. It will be shown that deviations from this optimum are costly, in such a way that at the firm level the outsourcing–performance relation takes on a negative curvilinear shape. Finally I will discuss some empirical and practical evidence to support this new, negative curvilinear perspective.

Why a new perspective is needed

There are broadly three groups of puzzles that can act as motivators for the creation of a new perspective on outsourcing and firm performance.