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Outsourcing and firm productivity: a production function approach

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  • Alberto López

Abstract

This paper is aimed at analyzing the relationship between outsourcing and productivity. Specifically, this paper deals with outsourcing at the firm level and focuses on the role of contracting out of manufacturing activities. I obtain new insights on this topic, mainly using a precise measure for outsourcing and analyzing differences across industries. Using an unbalanced panel of Spanish manufacturing firms, I estimate a production function depending on traditional inputs (labor, capital, and materials) and an index of production subcontracting. I find that for manufacturing as a whole, outsourcing intensity has a positive effect on productivity, showing an elasticity of output with respect to outsourcing around 0.15. When analyzing industry level results, I find that outsourcing intensity has a positive effect on productivity, mainly for firms belonging to light industries. Copyright Springer-Verlag Berlin Heidelberg 2014

Suggested Citation

  • Alberto López, 2014. "Outsourcing and firm productivity: a production function approach," Empirical Economics, Springer, vol. 47(3), pages 977-998, November.
    • Handle: RePEc:spr:empeco:v:47:y:2014:i:3:p:977-998
    DOI: 10.1007/s00181-013-0770-x
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    Cited by:

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    More about this item

    Keywords

    Outsourcing; Total factor productivity; Production function; Manufacturing firms; D21; D24; L60;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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