DefinePK

Abstract

This study uses structural equation modeling (SEM) to investigate the direct impact of four outsourcing elements - human resources functions, customer support services, finance and accounting, and IT services - on organizational agility in SMEs.  A purposive sampling technique was employed to collect date from 700 owners and managers of SMEs in Oyo State, Nigeria. Data analysis was performed with the aid of Path Analysis Structure Equation Modelling using STATA version 15. The study finds that HR outsourcing has a strong positive relationship with organizational agility, suggesting that outsourcing HR functions improves efficiency, improves access to a larger talent pool, and increases flexibility in managing human resources. The study also shows that outsourcing of customer support, finance and accounting, and IT are positively associated with organizational agility. The results suggest that each outsourcing element plays a significant role in improving organizational agility. Therefore, government should create a framework that encourages and incentivizes SMEs to invest in digital transformation through outsourcing. This supportive outsourcing ecosystem can support SME growth, promote job creation in the outsourcing industry, and strengthen the overall economy.