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Productivity effects of business process outsourcing: a firm-level investigation based on panel data

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  • Ohnemus, Jörg

Abstract

This paper analyses the impact of business process outsourcing (BPO) on firm productivity based on a comprehensive German firm-level panel data set covering manufacturing and service industries. The growing importance of service inputs into the production process is undisputed. Firms increasingly buy all or at least parts of selected services they need from external service providers. This is especially true for services which rely to a great extent on new information and communication technologies. Outsourcing firms can concentrate on their core competencies. Additionally, they benefit from the expertise of the external service provider. Finally, external vendors are able to provide services at lower price because of scale effects. By estimating a production function, I show that BPO has a positive and significant impact on firm-level productivity. The results are robust across different estimation techniques.

Suggested Citation

  • Ohnemus, Jörg, 2009. "Productivity effects of business process outsourcing: a firm-level investigation based on panel data," ZEW Discussion Papers 09-088, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:09088
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    More about this item

    Keywords

    Business Process Outsourcing (BPO); Productivity; Panel Data; Olley-Pakes; System-GMM;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • L80 - Industrial Organization - - Industry Studies: Services - - - General

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