Study of Factors Influencing Hotel outsources Decisions in Hainan-Based on the Transaction Cost Economics Approach

Abstract

The article aims to examine the effects of variables on outsourcing decisions in the hotel industry in Hainan. It specifically seeks to test and evaluate a theoretical framework that combines transaction cost economics (TCE) factors with additional factors affecting the level of outsourcing that emerged from a preliminary study. There is evidence to suggest that TCE explains outsourcing effectively in developed countries, but it may have less explanatory power in developing economies. Drawing on a sample of 144 hotels, each offering three activities for analysis, the results provide little support for TCE. Supplier availability, hotel experience, and hotel size are the strongest predictors of outsourcing in this study. Furthermore, because the low level of supplier market competition in hotel supporting industries in Thailand does not normally offer more efficiency and lower production cost than in-house operations, as assumed by TCE the theory fails to provide a clear explanation for hotel outsourcing practices.