The role of Emotional factors in Outsourcing of SMEs : An explanatory study of the factors that affect the decision making of outsourcing in SMEs

Abstract: The globalization of markets is hindering the competitive position of organizations throughout the world. On one hand, Small and Medium Sized Enterprises (SMEs) which have settled in a niche market face an escalating difficulty to defend their market share. On the other hand, increasing fragmentation of value chains throughout the world is turning many SMEs into powerless suppliers (Gammelgaard and Mathiasen, 2007). Consequently, SMEs are obliged to improve their competitiveness, and outsourcing is an effective tool to achieve that. However, its use is still not widespread throughout SMEs (Knowledge Wharton, 2004). In fact, SMEs are perceived to be stimulators of the local economies (Blackford as cited by Odaka and Hawai, 1999, p.58) and to be more attached to their local environment. The weight of emotional responses in decision making of outsourcing might be related to the low occurrence of it amongst SMEs. Hence, the aim of this study is to understand in which way the emotional factors affect the decision making of outsourcing in SMEs.The study follows a qualitative strategy with an explanatory research design. We did not only want to explore the impact of emotional factors, but understand the reasons behind it. Accordingly, we first identified the possible economic and emotional factor through the construction of the theoretical framework. This allowed us to know their individual relevance in the decision making, but unfortunately we could not obtain a coherent picture of their relationship. In order to accomplish these relations, the primary data was collected through in-depth semi-structured interviews. Six SMEs with headquarters in Umeå were interviewed and provided us with the necessary data. Consequently, our analysis unveiled the relationship between the factors that affect the decision of outsourcing - managing to fulfill the purpose of our study.Basically, our obtained results led us to the conclusion that the small or medium nature of the enterprise does not condition their emotional behavior. Therefore, we concluded that the fact that the enterprise being an SME does not imply that emotional factors have more weight in the decision making. In fact, we discovered that the emotional factor with the highest degree of influence in decision making of outsourcing in SMEs is the type of corporate culture of the business.The globalization of markets is hindering the competitive position of organizations throughout the world. On one hand, Small and Medium Sized Enterprises (SMEs) which have settled in a niche market face an escalating difficulty to defend their market share. On the other hand, increasing fragmentation of value chains throughout the world is turning many SMEs into powerless suppliers (Gammelgaard and Mathiasen, 2007). Consequently, SMEs are obliged to improve their competitiveness, and outsourcing is an effective tool to achieve that. However, its use is still not widespread throughout SMEs (Knowledge Wharton, 2004). In fact, SMEs are perceived to be stimulators of the local economies (Blackford as cited by Odaka and Hawai, 1999, p.58) and to be more attached to their local environment. The weight of emotional responses in decision making of outsourcing might be related to the low occurrence of it amongst SMEs. Hence, the aim of this study is to understand in which way the emotional factors affect the decision making of outsourcing in SMEs.The study follows a qualitative strategy with an explanatory research design. We did not only want to explore the impact of emotional factors, but understand the reasons behind it. Accordingly, we first identified the possible economic and emotional factor through the construction of the theoretical framework. This allowed us to know their individual relevance in the decision making, but unfortunately we could not obtain a coherent picture of their relationship. In order to accomplish these relations, the primary data was collected through in-depth semi-structured interviews. Six SMEs with headquarters in Umeå were interviewed and provided us with the necessary data. Consequently, our analysis unveiled the relationship between the factors that affect the decision of outsourcing - managing to fulfill the purpose of our study.Basically, our obtained results led us to the conclusion that the small or medium nature of the enterprise does not condition their emotional behavior. Therefore, we concluded that the fact that the enterprise being an SME does not imply that emotional factors have more weight in the decision making. In fact, we discovered that the emotional factor with the highest degree of influence in decision making of outsourcing in SMEs is the type of corporate culture of the business.