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Outsourcing, Foreign Ownership, and Productivity: Evidence from UK Establishment-level Data

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Author Info
Sourafel Girma
Holger Görg

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Abstract

The paper presents an empirical analysis of "outsourcing" using establishment-level data for UK manufacturing industries. The authors analyze an establishment's decision to outsource and the subsequent effects of outsourcing on the establishment's productivity. Outsourcing is compared in domestic with foreign-owned establishments. The empirical results suggest that high wages are positively related to outsourcing, suggesting that the cost-saving motive is important. Foreign-owned firms have higher levels of outsourcing than domestic establishments. In the productivity analysis, an establishment's outsourcing intensity is positively related to its labor productivity and total factor productivity growth, and this effect is more pronounced for foreign establishments. Copyright Blackwell Publishing Ltd 2004..

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File URL: http://www.blackwell-synergy.com/links/doi/10.1111/j.1467-9396.2004.00483.x/enhancedabs
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Publisher Info
Article provided by Blackwell Publishing in its journal Review of International Economics.

Volume (Year): 12 (2004)
Issue (Month): 5 (November)
Pages: 817-832
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Handle: RePEc:bla:reviec:v:12:y:2004:i:5:p:817-832

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Grossman, G.M. & Helpman, E., 2002. "Outsourcing in a Global Economy," Papers 218, Princeton, Woodrow Wilson School - Public and International Affairs.
    Other versions:
  2. Markusen, James R, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-89, Spring. [Downloadable!] (restricted)
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  4. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July. [Downloadable!] (restricted)
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  5. Hartmut Egger & Peter Egger, 2006. "International Outsourcing and the Productivity of Low-Skilled Labor in the EU," Economic Inquiry, Oxford University Press, vol. 44(1), pages 98-108, January. [Downloadable!] (restricted)
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  6. Hijzen, Alexander & Görg, Holger & Hine, Robert C., 2003. "International Fragmentation and Relative Wages in the UK," IZA Discussion Papers 717, Institute for the Study of Labor (IZA). [Downloadable!]
  7. Greenhalgh, C. & Gregory, M. & Ray, A., 1989. "The Changing Structure Of U.K. Production, Trade And Employment: An Analysis Using Input Output Tables 1974-84," Economics Series Working Papers 9970, University of Oxford, Department of Economics.
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  9. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August. [Downloadable!] (restricted)
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  10. Robert C. Feenstra & Gordon H. Hanson, 1996. "Globalization, Outsourcing, and Wage Inequality," NBER Working Papers 5424, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Baltagi, Badi H. & Griffin, James M., 1997. "Pooled estimators vs. their heterogeneous counterparts in the context of dynamic demand for gasoline," Journal of Econometrics, Elsevier, vol. 77(2), pages 303-327, April. [Downloadable!] (restricted)
  12. Gorzig, Bernd & Andreas Stephan, 2003. "Outsourcing and Firm-level Performance," Royal Economic Society Annual Conference 2003 90, Royal Economic Society. [Downloadable!]
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  13. Deardorff, Alan V., 2001. "Fragmentation in simple trade models," The North American Journal of Economics and Finance, Elsevier, vol. 12(2), pages 121-137, July. [Downloadable!] (restricted)
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  14. Thomas J. Holmes, 1999. "Localization Of Industry And Vertical Disintegration," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 314-325, May. [Downloadable!] (restricted)
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  15. Abraham, Katharine G & Taylor, Susan K, 1996. "Firms' Use of Outside Contractors: Theory and Evidence," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 394-424, July. [Downloadable!] (restricted)
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  16. Gene M. Grossman & Elhanan Helpman, 2002. "Integration Versus Outsourcing In Industry Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 85-120, February. [Downloadable!] (restricted)
  17. Rachel Griffith & Helen Simpson, 2003. "Characteristics of Foreign-Owned Firms in British Manufacturing," NBER Working Papers 9573, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  18. Holger Görg, 2000. "Fragmentation and trade: US inward processing trade in the EU," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 136(3), pages 403-422, 09. [Downloadable!] (restricted)
  19. Lyons, Bruce R., 1995. "Specific investment, economies of scale, and the make-or-buy decision: A test of transaction cost theory," Journal of Economic Behavior & Organization, Elsevier, vol. 26(3), pages 431-443, May. [Downloadable!] (restricted)
  20. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June. [Downloadable!] (restricted)
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  21. Görg, Holger & Hanley, Aoife, 2004. "Does Outsourcing Increase Profitability?," IZA Discussion Papers 1372, Institute for the Study of Labor (IZA). [Downloadable!]
  22. Fixler, Dennis J. & Siegel, Donald, 1999. "Outsourcing and productivity growth in services," Structural Change and Economic Dynamics, Elsevier, vol. 10(2), pages 177-194, June. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Eiichi Tomiura, 2004. "Foreign outsourcing and firm-level characteristics: evidence from Japanese manufacturers," Hi-Stat Discussion Paper Series d04-64, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  2. Amiti, Mary & Wei, Shang-Jin, 2006. "Service Offshoring, Productivity and Employment: Evidence from the US," CEPR Discussion Papers 5475, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  3. Manuel Artís & Raúl Ramos & Jordi Suriñach, 2007. "Job Losses, Outsourcing and Relocation: Empirical Evidence Using Microdata," IZA Discussion Papers 2978, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  4. Roberto Antonietti & Giulio Cainelli, 2007. "Production Outsourcing, Organizational Governance and Firm’s Technological Performance: Evidence from Italy," Working Papers 2007.58, Fondazione Eni Enrico Mattei. [Downloadable!]
    Other versions:
  5. Jyrki Ali-Yrkkö & Monika Jain, 2005. "Offshoring Software Development - Case of Indian Firms in Finland," Discussion Papers 971, The Research Institute of the Finnish Economy. [Downloadable!]
  6. Barba Navaretti, Giorgio & Castellani, Davide & Disdier, Anne-Célia, 2006. "How Does Investing in Cheap Labour Countries Affect Performance at Home? France and Italy," CEPR Discussion Papers 5765, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  7. Martin Falk & Yvonne Wolfmayr, . "International Outsourcing and Productivity Growth," FIW Research Reports series 17, FIW. [Downloadable!]
  8. Roberto Antonietti & Giulio Cainelli, 2007. "Spatial Agglomeration, Technology and Outsourcing of Knowledge Intensive Business Services Empirical Insights from Italy," Working Papers 2007.79, Fondazione Eni Enrico Mattei. [Downloadable!]
  9. Angela Triguero, & Carmen Díaz Mora, . "Why do some firms contract out production?," Studies on the Spanish Economy 232, FEDEA. [Downloadable!]
  10. Adelheid Holl, 2007. "Production Subcontracting and Location," Working Papers 2007-17, FEDEA. [Downloadable!]
    Other versions:
  11. Carmen Díaz Mora & Rosario Gandoy Juste, . "Estrategias de fragmentación de la producción: Una realidad en la industria española?," Studies on the Spanish Economy 180, FEDEA. [Downloadable!]
  12. Mary Amiti & Shang-Jin Wei, 2004. "Fear of Service Outsourcing: Is It Justified?," NBER Working Papers 10808, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  13. Wilhelm Kohler, 2007. "The Bazaar Effect, Unbundling of Comparative Advantage, and Migration," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  14. Görg, Holger & Hanley, Aoife, 2004. "Does Outsourcing Increase Profitability?," IZA Discussion Papers 1372, Institute for the Study of Labor (IZA). [Downloadable!]
  15. Mary Amiti & Shang-Jin Wei, 2005. "Service Offshoring, Productivity, and Employment: Evidence from the United States," IMF Working Papers 05/238, International Monetary Fund. [Downloadable!]
  16. R. Antonietti & D. Antonioli, 2007. "Production offshoring and the skill composition of Italian manufacturing firms A quasi-experimental analysis," Working Papers 594, Dipartimento Scienze Economiche, Università di Bologna. [Downloadable!]
    Other versions:
  17. Alexander HIJZEN & INUI Tomohiko & TODO Yasuyuki, 2007. "The Effects of Multinational Production on Domestic Performance: Evidence from Japanese Firms," Discussion papers 07006, Research Institute of Economy, Trade and Industry (RIETI). [Downloadable!]
  18. Giovanni Peri, 2004. "Catching-Up to Foreign Technology? Evidence on the "Veblen-Gerschenkron" Effect of Foreign Investments," NBER Working Papers 10893, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  19. Mary Amiti & Shang-Jin Wei, 2006. "Service Offshoring and Productivity: Evidence from the United States," NBER Working Papers 11926, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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