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Does Outsourcing Increase Profitability?

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Author Info

  • Görg, Holger

    ()
    (Kiel Institute for the World Economy)

  • Hanley, Aoife

    ()
    (Kiel Institute for the World Economy)

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 and services inputs, 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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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1372.

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Length: 29 pages
Date of creation: Oct 2004
Date of revision:
Publication status: published in: Economic and Social Review, 2004, 35(3), 267-288
Handle: RePEc:iza:izadps:dp1372

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Keywords: outsourcing; subcontracting; profitability; electronics;

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  1. Domowitz, Ian & Hubbard, R Glenn & Petersen, Bruce C, 1987. "Oligopoly Supergames: Some Empirical Evidence on Prices and Margins," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 379-98, June.
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  16. 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.
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