Size Evolution and Outsourcing: Theory and Evidence from Australian Manufacturing
AbstractThis paper sheds new light on the forces shaping outsourcing decision by considering a certain form of non-linearity in overhead costs which effectively discretizes a firm’s size into small and large regimes. Extending Grossman & Helpman (2002) in this line shows that firms unable to fully transition from small to large due to their level of efficiency would outsource to downsize and save on overhead costs. A panel of Australian manufacturing firms is used to construct an instrument for the transitioning firm and to test the hypothesis. In support of the theory, those firms in transition with no growth plans have stronger incentives to contract out and downsize. The findings open a new avenue to rethink growth and job creation amongst small businesses.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by School of Economics, The University of New South Wales in its series Discussion Papers with number 2012-08.
Length: 37 pages
Date of creation: Oct 2011
Date of revision:
Contact details of provider:
Postal: Australian School of Business Building, Sydney 2052
Fax: +61)-2- 9313- 6337
Web page: http://www.economics.unsw.edu.au/
More information through EDIRC
Small Business; productivity; outsourcing; Overhead Cost.;
Find related papers by JEL classification:
- C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Factor Analysis
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
- L6 - Industrial Organization - - Industry Studies: Manufacturing
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.:
- Sasan Bakhtiari, 2011. "Efficiency and Outsourcing: Evidence from Australian Manufacturing," Discussion Papers 2012-07, School of Economics, The University of New South Wales.
- Kevin J. Fox & W. Erwin Diewert, 2004.
"On the Estimation of Returns to Scale, Technical Progress and Monopolistic Markups,"
Econometric Society 2004 Australasian Meetings
310, Econometric Society.
- Diewert, W. Erwin & Fox, Kevin J., 2008. "On the estimation of returns to scale, technical progress and monopolistic markups," Journal of Econometrics, Elsevier, vol. 145(1-2), pages 174-193, July.
- Catherine J. Morrison Paul & Mahmut Yasar, 2009. "Outsourcing, productivity, and input composition at the plant level," Canadian Journal of Economics, Canadian Economics Association, vol. 42(2), pages 422-439, May.
- John Haltiwanger & Ron S. Jarmin & Javier Miranda, 2010.
"Who Creates Jobs? Small vs. Large vs. Young,"
10-17, Center for Economic Studies, U.S. Census Bureau.
- Robert Breunig & Marn-Heong Wong, 2007.
"A Richer Understanding of Australia’s Productivity Performance in the 1990s: Improved estimates based upon firm-level panel data,"
CEPR Discussion Papers
545, Centre for Economic Policy Research, Research School of Economics, Australian National University.
- Robert Breunig & Marn-Heong Wong, 2008. "A Richer Understanding of Australia's Productivity Performance in the 1990s: Improved Estimates Based Upon Firm-Level Panel Data," The Economic Record, The Economic Society of Australia, vol. 84(265), pages 157-176, 06.
- Katharine G. Abraham & Susan K. Taylor, 1993.
"Firms' Use of Outside Contractors: Theory and Evidence,"
NBER Working Papers
4468, National Bureau of Economic Research, Inc.
- 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.
- Stefano Federico, 2010. "Outsourcing versus integration at home or abroad and firm heterogeneity," Empirica, Springer, vol. 37(1), pages 47-63, February.
- José C. Fariñas & Ana Martín-Marcos, 2010. "Foreign Sourcing and Productivity: Evidence at the Firm Level," The World Economy, Wiley Blackwell, vol. 33(3), pages 482-506, 03.
- Sasan Bakhtiari, 2012. "Small Business Redefined: A Quasi-Linear Fuzzy Classification of Firm Size," Discussion Papers 2012-24, School of Economics, The University of New South Wales.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guillaume Roger) The email address of this maintainer does not seem to be valid anymore. Please ask Guillaume Roger to update the entry or send us the correct address.
If references are entirely missing, you can add them using this form.