In this research, we provide a comprehensive examination regarding outsourcing policies and decisions by conducting a systematic analysis from macro to micro level. At the macro level, we utilize a BOCR-based (Benefit, Opportunity, Cost, Risk) Analytical Network Process (ANP) model to find the best government policy regarding outsourcing. At the micro level, we carry out a case study to demonstrate how firm level outsourcing decisions can be made. For such, we employ a comprehensive model that consists of the the BSC-based (Balanced Scorecard) ANP model to assess the case firms strategic alternatives and to identify the best option for the studied firm. After recommending the best outsourcing strategy, i.e. selective outsourcing, to the case firm, we then proposed an AHP ratings model for the firm to prioritize the various activities and identify the activities to outsource.Understanding the economic impact of outsourcing can help firms facing outsourcing options to make a better decision. To provide firms with this guidance and the decision-support tool, in chapter 5 of this dissertation we empirically examine the relationship between outsourcing contract size, as reported in news and trade journals, and the firms financial performance.Using the data from Compustat for those firms that conducted outsourcing, we are able to predict firms post-outsourcing financial performance, as measured by Tobins q and the changes in Tobins q. Besides predicting financial performance, our empirical models also reveal a number of important managerial implications. In the modeling process, we make use of both traditional Least Squares Regression and advanced Machine Learning techniques, such as Regression Tree and Neural Networks.In the research front, our empirical study offers three significant findings: (1) there is a non-linear relationship between outsourcing contract value and the change in Tobins q; (2) firms other accounting variables do interact with the outsourcing contract size in affecting the firms Tobins q; and (3) outsourcing affects firms differently.In summary, the body of this dissertation consists of the three key areas: macro- and micro-level outsourcing decision making, and financial performance evaluation and prediction.
