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Does Outsourcing Increase Profitability?

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  • Holger Görg

    (University of Nottingham and DIW Berlin)

  • Aoife Hanley

    (University of Nottingham Trinity College Dublin)

Abstract

We investigate the relationship between outsourcing and profitability paying particular attention to the endogeneity of outsourcing. The empirical analysis uses unique plant level data for the electronics sector in Ireland. A particular feature of the data is that it records detailed information for 12 electronics sub-sectors covering both manufacturing and services activities. We distinguish outsourcing of materials from outsourcing of services inputs. We find that plants that are substantially larger than the mean employment size benefit from outsourcing materials while this does not appear to be the case for small plants. Results for outsourcing of services are not as clear-cut, however.

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File URL: http://www.esr.ie/Vol35%203/Vol%2035_3Gorg.pdf
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Bibliographic Info

Article provided by Economic and Social Studies in its journal Economic and Social Review.

Volume (Year): 35 (2004)
Issue (Month): 3 ()
Pages: 267-288

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Handle: RePEc:eso:journl:v:35:y:2004:i:3:p:267-288

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  1. Grossman, Sanford J. & Hart, Oliver D., 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Scholarly Articles 3450060, Harvard University Department of Economics.
  2. 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.
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