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IT Outsourcing in Finnish Business

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Author Info
Mika Maliranta
Petri Rouvinen
Aarno Airaksinen

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Abstract

ABSTRACT : This paper reviews the characteristics and magnitude of information technology (IT) outsourcing as well as studies its labor productivity effects with a representative sample of Finnish businesses. Depending on the IT task in question, on average from one-third to two-thirds of IT has been outsourced; of the ten categories considered, the development of non-Internet business-to-business applications (e.g., EDI) is the leading activity in this respect. The various dimensions of IT outsourcing are all highly positively correlated. After controlling for industry and regional effects as well as characteristics of firms and their employees, it is found that an externally-supported computer user is about 20% more productive than an otherwise similar worker without a computer, which corresponds to about 5% output elasticity of outsourced IT; the effect of internally-supported computer use is not statistically significantly different for zero, and it is also several times smaller in magnitude. While the issues of causality, timing, self-selection, and unobserved firm heterogeneity are not fully addressed, the findings nevertheless suggest that IT outsourcing may have significant economic consequences.

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Publisher Info
Paper provided by The Research Institute of the Finnish Economy in its series Discussion Papers with number 1140.

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Length: 16 pages
Date of creation: 10 Jun 2008
Date of revision:
Handle: RePEc:rif:dpaper:1140

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Related research
Keywords: labor productivity; information technology; computers; outsourcing Finnish business;

Other versions of this item:

Find related papers by JEL classification:
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures

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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. Mika Maliranta & Satu Nurmi, 2007. "Does Foreign Presence Stimulate Creative Destruction in Local Markets," Discussion Papers 1114, The Research Institute of the Finnish Economy. [Downloadable!]
  2. Fransesca Valentini, 2008. "Unemployment Insurance Savings Accounts: An Overview," Discussion Papers 1136, The Research Institute of the Finnish Economy. [Downloadable!]
  3. Hyytinen, Ari & Rouvinen, Petri, 2008. "The labour market consequences of self-employment spells: European evidence," Labour Economics, Elsevier, vol. 15(2), pages 246-271, April. [Downloadable!] (restricted)
    Other versions:
  4. Maliranta, Mika & Mohnen, Pierre & Rouvinen, Petri, 2008. "Is Inter-Firm Labor Mobility a Channel of Knowledge spillovers? Evidence from a Linked Employer-Employee Panel," UNU-MERIT Working Paper Series 005, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology. [Downloadable!]
    Other versions:
  5. Mika Maliranta & Satu Nurmi & Hanna Virtanen, 2008. "It takes three to tango in employment: Matching vocational education organisations, students and companies in labour market," Economics of Education Working Paper Series 0022, University of Zurich, Institute for Strategy and Business Economics (ISU). [Downloadable!]
  6. Mika Pajarinen & Petri Rouvinen, 2008. "Verkostoitumisen yhteys yritysten kannattavuuteen ja kasvuun: empiirisiä havaintoja," Discussion Papers 1118, The Research Institute of the Finnish Economy. [Downloadable!]
  7. Johansson, Edvard & Böckerman, Petri & Uutela, Antti, 2007. "Alcohol Consumption and Sickness Absence: Evidence from Panel Data," MPRA Paper 6398, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  8. Jukka Lassila & Tarmo Valkonen, 2008. "Applying the Swedish Pension Brake," Discussion Papers 1127, The Research Institute of the Finnish Economy. [Downloadable!]
  9. Olavi Rantala, 2008. "Sosiaalietuuksien rahoituksen alueelliset kuluttajahintavaikutukset," Discussion Papers 1125, The Research Institute of the Finnish Economy. [Downloadable!]
  10. Mika Pajarinen & Pekka Ylä-Anttila, 2008. "Large Corporations in the Finnish Economy," Discussion Papers 1138, The Research Institute of the Finnish Economy. [Downloadable!]
  11. Antti-Jussi Tahvanainen & Raine Hermans, 2008. "Agglomeration and Specialisation Patterns of Finnish Biotechnology. On the Search for an Economic Rationale of a Dispersed Industry Structure," Discussion Papers 1133, The Research Institute of the Finnish Economy. [Downloadable!]
  12. Ville Kaitila & Kari E. O. Alho & Nuutti Nikula, 2007. "Growth Prospects of Emerging Market Economies in Europe - How Fast Will They Catch up with the Old West?," Discussion Papers 1115, The Research Institute of the Finnish Economy. [Downloadable!]
  13. Rainen Hermans & Martti Kulvik & Antti Tahvanainen, 2008. "Biotekniikan ennakointi," Discussion Papers 1130, The Research Institute of the Finnish Economy. [Downloadable!]
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. Böckerman, Petri & Riihimäki, Elisa, 2009. "International outsourcing and labour demand: Evidence from Finnish firm-level data," MPRA Paper 16903, University Library of Munich, Germany. [Downloadable!]
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