Production Outsourcing, Organizational Governance and Firm’s Technological Performance: Evidence from Italy
This paper attempts to study whether and how a firm’s decision to outsource production activities affects its technological performance. In particular, it analyzes how the alignment between the firm’s governance strategy and the underlying attributes of the transactions, affect the capacity of the firm to introduce new products and processes. Using microeconomic data on a panel of Italian manufacturing firms for the period 1998-2003, the paper develops a two-stage approach. First, it estimates the determinants of the firm’s organizational governance (production outsourcing), and then it incorporates a measure of governance misalignment into the technological performance relation. It is found that firms not aligned with the optimal organizational governance perform less efficiently in terms of process innovation than more aligned competitors, but misalignment has a positive effect on product innovation. However, this counterintuitive result is strongly characterized by non-linear effects that reverse the correlation for high values of governance misfit.
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Volume (Year): VI (2008)
Issue (Month): 1 (February)
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