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Why do some firms contract out production? Evidence from firm-level panel data

  • C. Díaz-Mora
  • A. Triguero-Cano

This article examines which factors determine outsourcing decision using firm level data. According to the theoretical and empirical literature, firm, industry and market characteristics influence the likelihood of contracting out. We try to identify which firm characteristics are prerequisites for becoming an outsourcer. Using a dynamic panel data probit model, our results show that firms with previous subcontracting experience, higher wages, frequent market changes, R&D activities, product differentiation, large size and exporter status are more likely to engage in outsourcing.

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File URL: http://hdl.handle.net/10.1080/00036846.2010.548787
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Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 44 (2012)
Issue (Month): 13 (May)
Pages: 1631-1644

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Handle: RePEc:taf:applec:44:y:2012:i:13:p:1631-1644
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  1. Holger Görg & Aoife Hanley, 2004. "Does Outsourcing Increase Profitability?," The Economic and Social Review, Economic and Social Studies, vol. 35(3), pages 267-288.
  2. Kimura, Fukunari & Ando, Mitsuyo, 2005. "Two-dimensional fragmentation in East Asia: Conceptual framework and empirics," International Review of Economics & Finance, Elsevier, vol. 14(3), pages 317-348.
  3. Tomiura, Eiichi, 2005. "Foreign outsourcing and firm-level characteristics: Evidence from Japanese manufacturers," Journal of the Japanese and International Economies, Elsevier, vol. 19(2), pages 255-271, June.
  4. Gene M. Grossman & Elhanan Helpman, 2002. "Outsourcing in a Global Economy?," Harvard Institute of Economic Research Working Papers 1966, Harvard - Institute of Economic Research.
  5. Swenson, Deborah L., 2004. "Entry costs and outsourcing decisions: evidence from the U.S. overseas assembly provision," The North American Journal of Economics and Finance, Elsevier, vol. 15(3), pages 267-286, December.
  6. Yukako Ono, 2002. "Outsourcing business services and the role of central administrative offices," Working Paper Series WP-02-01, Federal Reserve Bank of Chicago.
  7. Adelheid Holl, 2007. "Production Subcontracting and Location," Working Papers 2007-17, FEDEA.
  8. Abraham, Katharine G & Taylor, Susan K, 1996. "Firms' Use of Outside Contractors: Theory and Evidence," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 394-424, July.
  9. Stefan Buehler & Justus Haucap, 2003. "Strategic Outsourcing Revisited," SOI - Working Papers 0305, Socioeconomic Institute - University of Zurich.
  10. John McLaren, 2000. ""Globalization" and Vertical Structure," American Economic Review, American Economic Association, vol. 90(5), pages 1239-1254, December.
  11. Sourafel Girma & Holger Görg, 2004. "Outsourcing, Foreign Ownership, and Productivity: Evidence from UK Establishment-level Data," Review of International Economics, Wiley Blackwell, vol. 12(5), pages 817-832, November.
  12. Shy, Oz & Stenbacka, Rune, 2003. "Strategic outsourcing," Journal of Economic Behavior & Organization, Elsevier, vol. 50(2), pages 203-224, February.
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