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1. Introduction
1.1 Rationale for research
Outsourcing can be defined as “the transfer of activities and processes previously conducted internally to an external party” (Ellram and Billington, 2001). The question of the focus on cost vs cooperation and risk management in outsourcing is an essential one and may vary in different industries. This paper discusses this assessment in aviation.
Aviation is a strongly regulated industry where decisions about outsourcing non-core elements of business processes need to be evaluated against several aspects (not only cost). Understanding these mechanisms is essential for further development of the efficiency of aviation in a safe and controllable manner and this understanding can also provide a basis for studying other equally regulated industry segments. In this paper, the existing research is summarized using a framework that supports solution design and management decision making.
The transaction cost theory (TCE) is a classical means to analyze outsourcing. It is particularly focused on cost savings compared to the in-house production of goods or services and it attempts to identify competitive advantages from contracting, e.g., compensation from the extra costs resulting from the transaction itself. Other approaches have also been gaining popularity such as the resource-based view. In this view, the focus is more on optimizing the use of resources and finding complementarity and cooperation rather than purely examining costs. Holcomb and Hitt (2006) combined these two approaches into a model that the writers call strategic outsourcing, which is defined as “a way for companies to rely on other market actors to provide specialized capabilities that supplement existing capabilities used in production.”
According to Demirtas (2013), little is known about how the subjective thoughts for outsourcing are actually transformed into objective criteria. This researcher also discusses the essential aspects of considering core competencies as a background for these decisions. A key motivator for the current study is to locate the gaps in existing research as a guide for further studies.
The problem in the context of aviation operators is the purchasing of technical services from an outside service provider. The services have either previously been performed in-house by the operator or can typically be performed in-house in this industry segment.
1.2 Definitions
During this research, the limited extent of definitions that exist in the scientific...