Study the impact of labor outsourcing on the financial performance of small and medium enterprises in Mekong Delta, Vietnam

Abstract

The study aims to identify factors influencing labor outsourcing and analyze the impact of outsourced resources on small and medium enterprises’ financial performance in the Mekong Delta. Based on theories (including TCE, CCT, RT, and SCT theory), previous studies, and expert interviews, this research model has been developed and tested in SMEs in the Mekong Delta. The study collected data from administrators at 409 SMEs who used outsourced labor services in the last two years. Analytical methods are used, including Cronbach’s Alpha test, Exploratory Factor Analysis (EFA), Confirmatory Factor Analysis (CFA), and Structural Equation Modeling (SEM). The research results show that outsourcing depends on the functional characteristics of enterprises, risk control, managers’ attitude, and relationships in outsourcing. The study also confirms that labor outsourcing positively affects financial performance. However, the relationship between the use of outsourced resources and enterprises’ financial performance is very modest. Based on the research results, the authors also suggest managerial implications to improve SMEs’ performance through outsourcing.