Outsourcing and Firm Productivity in Irish Manufacturing

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Outsourcing and Firm Productivity in Irish Manufacturing

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Fergal McCann

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Fergal McCann

Abstract

The causality from outsourcing, defined as the procurement of inputs from outside the boundaries of the firm, to productivity is tested for a large panel of Irish manufacturing firms. Theory suggests that as firms outsource more 'non-core' activities to specialized providers, productivity due to the firm benefiting from cheaper or higher-quality inputs and from reallocation of resources towards higher value-added activities. The international outsourcing case adds another dimension in the form of input variety, quality and technological embeddedness. I test the above hypothesis using a "System GMM" estimator to control for endogeneity in the panel and allow for a lagged dependent variable to be a regressor. International outsourcing is found to lead to productivity gains, but upon closer inspection it seems that firms? international orientation and type of industry both matter.

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Paper provided by FIW in its series FIW Working Paper series with number 021.

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Handle: RePEc:wsr:wpaper:y:2009:i:021

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Find related papers by JEL classification:
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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