Efficiency and Outsourcing: Evidence from Australian Manufacturing
AbstractThis paper studies the role of efficiency in a firm’s decision to contract out. Emphasis is on the heterogeneous nature of firms and when firms are only considering outsourcing to domestic suppliers. Firm-level data on Australian manufacturing reveal an ordering of efficiency between firms that contract out and those that do not, in which contracting-out firms are on aggregate less efficient. The analysis further shows that firms experience improvement in their efficiency soon after contracting out, but only if their performance has been below average prior to contracting out. The results show robustness to the choice of efficiency measure, where efficiency is expressed in both productivity and cost advantage.
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Bibliographic InfoPaper provided by School of Economics, The University of New South Wales in its series Discussion Papers with number 2012-07.
Length: 18 pages
Date of creation: Oct 2011
Date of revision:
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Postal: Australian School of Business Building, Sydney 2052
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Web page: http://www.economics.unsw.edu.au/
More information through EDIRC
Outsourcing; Productivity; Cost Advantage; Manufacturing.;
Find related papers by JEL classification:
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
- L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
- L6 - Industrial Organization - - Industry Studies: Manufacturing
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