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Does ICT Investment Spur or Hamper Offshoring? Empirical Evidence from Microdata

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  • Luigi Benfratello

    ()
    (Department of Economics and Public Finance "G. Prato", University of Torino)

  • Tiziano Razzolini

    ()
    (Department of Economics, University of Siena)

  • Alessandro Sembenelli

    ()
    (Department of Economics and Public Finance "G. Prato", University of Torino)

Abstract

In this paper we provide empirical evidence on the effect of ICT investment on the propensity to offshore for a large sample of Italian manufacturing firms. Contrary to previous literature focusing on the service sector, after taking into account the endogeneity of ICT investment in the offshoring decision equation we find a negative and significant effect of ICT on the propensity to offshore some stages of the production process. Furthermore this effect turns out not to depend on the type of ICT investment and applies both to hardware and software/telecommunication expenditures. A potential explanation for our finding is that ICT investments in manufacturing increase the complementarity of production processes within the firm, thereby reducing the incentive to offshore. Our results seem therefore to suggest that negative exogenous shocks to ICT prices–possibly induced by targeted policy programs aimed at the diffusion of ICT technologies–do not favor offshoring of manufacturing activities.

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File URL: http://web.econ.unito.it/prato/papers/n5.pdf
File Function: First version, 2009
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Bibliographic Info

Paper provided by Former Department of Economics and Public Finance "G. Prato", University of Torino in its series Working papers with number 5.

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Length: 35 pages
Date of creation: Jun 2009
Date of revision:
Handle: RePEc:tur:wpaper:5

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Keywords: ICT Investment; Offshoring; Maximum Likelihood System Estimation;

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Cited by:
  1. Valeria Gattai & Valentina Trovato, 2014. "Estimating sourcing premia with Italian regional data," Working Papers 276, University of Milano-Bicocca, Department of Economics, revised Jun 2014.
  2. Andrea Filippo Presbitero & Matteo G. Richiardi & Alessia Amighini, 2012. "Is labor flexibility a substitute to offshoring? Evidence from Italian manafacturing," Mo.Fi.R. Working Papers 72, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  3. Rasel, Fabienne, 2012. "Offshoring and ICT: Evidence for German manufacturing and service firms," ZEW Discussion Papers 12-087, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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