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Innovation and the geographical and functional dimensions of outsourcing: An empirical investigation based on Italian firm level data

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Author Info

  • Lucia Cusmano

    ()

  • Maria Luisa Mancasi

    ()

  • Andrea Morrison

    ()

Abstract

The paper investigates the diversified patterns of outsourcing in the Lombardy region and relates them to the probability of introducing product and process innovation. Based on a large firm-level survey, we show that outsourcing processes are strongly regionally embedded and that offshoring is still a limited phenomenon. Outsourcing strategies are shown to have a positive impact on firms’ innovation. In particular, the outsourcing of service activities contributes the most to innovation, thus suggesting that firms successfully pursue core strengthening strategies. Our econometric estimates show that both geographical and organizational proximity matter. Indeed, the positive association of services with innovation is strongly related to their regional dimension, which points toward the importance of local user-producer relationships. When outsourcing crosses national borders, keeping the outsourced activities at least loosely connected to the firm appears critical, as offshoring to non affiliated firms has a clear negative impact on innovation.

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File URL: http://econ.geo.uu.nl/peeg/peeg0806.pdf
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Bibliographic Info

Paper provided by Utrecht University, Section of Economic Geography in its series Papers in Evolutionary Economic Geography (PEEG) with number 0806.

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Length: 25 pages
Date of creation: Mar 2008
Date of revision: Apr 2008
Handle: RePEc:egu:wpaper:0806

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Keywords: Product Innovation; Process Innovation; Outsourcing; Offshoring;

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