Outsourcing The Human Resource Function: Environmental and Organizational Characteristics That Affect HR Performance

Abstract

A theoretical model is presented that identifies environmental and organizationalcharacteristics that affect human resource (HR) performance in an organization.Specifically, we address the issue of when and under what circumstancesdoes HR outsourcing contribute value to the firm by attempting to identify environmentaland organizational characteristics that affect HR department performanceand how HR outsourcing mediates that relationship. We propose that suppliercompetition in the HR provider market has a direct effect on the amount of HRoutsourcing which in turn has a direct effect on HR performance. Environmentaluncertainty (primary, competitive, and supplier) is proposed to moderate the relationshipbetween amount of HR outsourcing and HR performance while assetspecificity is proposed to moderate the relationship between supplier competitionand amount of HR outsourcing. An earlier version of this paper was presented atthe Southwest Academy of Management meeting in Houston, Texas, March, 2003,and received the 2003 Irwin/McGraw-Hill Distinguished Paper Award.