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Do Innovation and Offshoring Make a Difference? An Empirical Exploration of the Effects on the Performance of European Firms

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  • Pinuccia Calia
  • Ida D'Attoma
  • Silvia Pacei

Abstract

This study attempts to answer the question of whether European manufacturing firms that undertake offshoring, innovation or both benefit from higher productivity and profitability. From a methodological point of view, the driving forces that push firms to innovate and/or to offshore can be seen as self-selection mechanisms that make the estimation of their economic impact more difficult if the confounding factors affecting these mechanisms also affect the economic performance of the firms. To disentangle the effect of both offshoring and innovation on firms¡¯ performances from the effect of firm characteristics, the propensity score matching methodology in a multi-overlapping treatment setting is used. The study targets European countries using the EU-EFIGE/Bruegel-Unicredit dataset. Decisions to offshore and innovate do not seem to have a significant effect on productivity, whereas the decision to innovate only has a significant effect on firm profitability.

Suggested Citation

  • Pinuccia Calia & Ida D'Attoma & Silvia Pacei, 2016. "Do Innovation and Offshoring Make a Difference? An Empirical Exploration of the Effects on the Performance of European Firms," International Business Research, Canadian Center of Science and Education, vol. 9(7), pages 98-115, July.
  • Handle: RePEc:ibn:ibrjnl:v:9:y:2016:i:7:p:98-115
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    References listed on IDEAS

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    1. Holger Görg & Aoife Hanley & Eric Strobl, 2008. "Productivity effects of international outsourcing: evidence from plant‐level data," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 41(2), pages 670-688, May.
    2. Rachel Griffith & Elena Huergo & Jacques Mairesse & Bettina Peters, 2006. "Innovation and Productivity Across Four European Countries," Oxford Review of Economic Policy, Oxford University Press, vol. 22(4), pages 483-498, Winter.
    3. Hall, B.H., 2011. "Innovation and productivity," MERIT Working Papers 2011-028, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    4. Paul Geroski & Steve Machin & John Van Reenen, 1993. "The Profitability of Innovating Firms," RAND Journal of Economics, The RAND Corporation, vol. 24(2), pages 198-211, Summer.
    5. Aude Ducroquet & Pierre Louart, 2012. "Small and Medium-sized Enterprises and their Attitudes towards internationalization and Innovation," Post-Print hal-02534689, HAL.
    6. Helpman,Elhanan & Sadka,Efraim (ed.), 2011. "Economic Policy in the International Economy," Cambridge Books, Cambridge University Press, number 9780521178426, January.
    7. Parisi, Maria Laura & Schiantarelli, Fabio & Sembenelli, Alessandro, 2006. "Productivity, innovation and R&D: Micro evidence for Italy," European Economic Review, Elsevier, vol. 50(8), pages 2037-2061, November.
    8. P. Louart & A. Martin, 2012. "Small and medium-sized enterprises and their attitudes towards internationalization and innovation," Post-Print hal-00803727, HAL.
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    Cited by:

    1. Samarth Gupta, 2023. "Model-Selection Inference for Causal Impact of Clusters and Collaboration on MSMEs in India," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 21(3), pages 641-662, September.
    2. David Urbano & Andreu Turro & Sebastian Aparicio, 2020. "Innovation through R&D activities in the European context: antecedents and consequences," The Journal of Technology Transfer, Springer, vol. 45(5), pages 1481-1504, October.

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    More about this item

    Keywords

    matching; multi-treatment propensity score; productivity; profitability;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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