Abstract:
Outsourcing refers to a situation where a business contracts its business processes to a third
party. During this process, the business may transfer some of its resources (such as employees
and assets) from one firm to another. Moreover, outsourcing is inclusive of both the domestic
and the foreign markets; sometimes this may result to transfer of the business to another country.
Outsourcing creates value within firms’ supply chains beyond those achieved through cost
economies. Intermediate markets that provide specialized capabilities emerge as different
industry conditions intensify the partitioning of production. As a result of greater information
standardization and simplified coordination, clear administrative demarcations emerge along a
value chain (Jacobides & Winter, 2005). This study focuses on the factors that influence
adoption of outsourcing by manufacturing companies that are listed on the Nairobi Securities
Exchange and aims at establishing the effects of outsourcing to a company. The study relied on
specific objectives which included; establishing the importance of the need to reduce costs on the
adoption of outsourcing by manufacturing firms, the importance of resource inadequacy on the
adoption of outsourcing and the importance of adoption of outsourcing by competitors on its
adoption by the manufacturing firms. To carry out the study, semi-structured questionnaires were
administered to the respondents by the researchers. Out of the estimated sample size of 50
respondents, 43 respondents completed the interview thereby providing sufficient primary data to
establish reliable results for the study. From the findings the researchers recommend that; when
making the decision to adopt outsourcing, the firm should consider factors only pertinent to it
individually, but consideration may also be given to the impact of outsourcing on other similarly
placed firms which may have adopted it. Outsourcing should not be adopted blindly just because
it has been adopted by other firms.
