This research focuses on logistics capabilities, logistics outsourcing, and their effects on firm performance in an e-commerce market environment. New logistical challenges in the e-commerce market require firms to create an entirely new logistics infrastructure to handle these challenges. These new logistics requirements are creating opportunities for third-party logistics service providers (Kroll 1999; Karpinski 1999; Foster 1999). The use of external logistics experts are particularly effective when a firm is facing pressure for order fulfillment and its existing distribution network is not meeting the customer requests in the e-commerce market.; This research modifies previously studied logistics capabilities measurement so that it can represent the e-commerce logistics challenge. Logistics outsourcing is represented by a dichotomous variable: non-outsourcing or outsourcing. Firm performance is measured by multiple measures including overall performance, profitability, sales growth, and customer satisfaction.; Mail survey methodology was used and the research focuses on the computer and consumer electronics retailers that sell products most often traded online. The collected data are assessed for unidimensionality, discriminant validity, and reliability. Confirmatory factor analysis was conducted to confirm each of three sets of variables. Linear regression was the basic statistical tool to test the hypotheses and interaction effects of logistics outsourcing.; The results show that logistics capabilities have a positive relationship with firm performance in an e-commerce market. First, logistics capabilities are perceived as a firm's critical capability to maintain a competitive advantage and perform well in the e commerce market. Thus firms operating in the e-commerce environment should develop strong logistics capabilities. Second, and somewhat surprising, the positive effects of logistics outsourcing are not supported. Outsourcing firms are found to perceive that they perform more poorly than non-outsourcing firms. Third, the association between logistics capabilities and outsourcing is not supported. Logistics capabilities may not be the sole reason to outsource a firm's logistics function. This finding may indicate that firms with strong logistics capabilities still need logistics outsourcing. Finally, the moderating role of outsourcing is supported in the negative direction, however. These negative moderating effects imply that firms with strong logistics capabilities should avoid outsourcing since there appears to exist a lack of synergy. The study shows that if the firms have strong logistics capabilities, then the performance will become worse when outsourcing is being used. This may imply that firms should avoid duplicating investment in their own logistics capabilities and buying third party services. Higher value regression coefficients for outsourcing firms also imply that logistics capabilities play a more important role for firm performance for outsourcing firms than non-outsourcing firms.
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