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Contract manufacturing, market competition, and labor productivity in US manufacturing industries

Author

Listed:
  • Dazhong Wu

    (University of the District of Columbia)

  • Michael Tannen

    (University of the District of Columbia)

  • Julius Anyu

    (University of the District of Columbia)

  • Sergey Ivanov

    (University of the District of Columbia)

  • Feng Xu

    (University of the District of Columbia)

Abstract

How does contract manufacturing /outsourcing affect productivity? Existing studies have conflicting empirical findings regarding this issue. This paper aims to reconcile these conflicting findings in the literature by viewing the research question through the lens of the property rights theory. The authors develop a moderated moderation model to empirically examine how productivity is influenced by the interactions among contract manufacturing, competition, and suppliers’ productivity spillover. Our model shows that though conflicting findings have been reported in the literature, each finding holds true under certain conditions which are identified in our paper. In brief, contract manufacturing /outsourcing improves productivity when suppliers’ productivity growth is above average and focal industry’s competition is at medium level. On the other hand, if suppliers’ productivity growth is low, or focal industry’s competition is too high or too low, the impact of contract manufacturing /outsourcing could be negative or not significant.

Suggested Citation

  • Dazhong Wu & Michael Tannen & Julius Anyu & Sergey Ivanov & Feng Xu, 2023. "Contract manufacturing, market competition, and labor productivity in US manufacturing industries," Operations Management Research, Springer, vol. 16(1), pages 377-390, March.
    • Handle: RePEc:spr:opmare:v:16:y:2023:i:1:d:10.1007_s12063-022-00317-0
    DOI: 10.1007/s12063-022-00317-0
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