A Conceptual Analysis of Outsourcing Decisions, Competitive Capabilities and Business Performance: A Study of Malaysian SMEs Manufacturing Firms

Small and Medium Enterprises (SMEs) in Malaysia play an important role in order to reduce dependency on global economy. To actively participate in this environment, domestic SMEs must consider outsourcing their sources in operating activities. It is emerging as an important engine for organisational strategy, as adaptation of such strategies relative to external economic pressures is proving to be an invaluable option. This study aims to conceptually analyse outsourcing decisions with competitive capabilities and business performance among Malaysian SMEs. The main constructs being discussed are outsourcing decisions, competitive capabilities and business performance; their relationships with each other are explored by reviewing past literature. This paper will contribute to providing a comprehensive model that correlates the three aspects in different perspectives with the context of Malaysia. Hence, this work is anticipated to benefit the social, economic and domestic practices by guiding SME practitioners and policy-makers in implementing outsourcing in daily operations.