Professional Employer Organizations and Their Impact on Client Satisfaction With Human Resource Outcomes: A Field Study of Human Resource Outsourcing in Small and Medium Enterprises

Increasingly, small and medium enterprises are outsourcing human resource (HR) activities to professional employer organizations (PEOs). The authors draw on social network theory, transaction cost economics, and social exchange theory to examine how PEO and client characteristics moderate the impact associated with outsourcing human capital-enhancing HR services. Results from a study suggest that using a PEO for human capital-enhancing services was positively related to HR outcomes and that this relationship was stronger when a weak-ties service delivery model was used, client receptivity was high, and the PEO contract was more detailed.