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Outsourcing and Offshoring of Business Services: How Important is ICT?

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  • Laura Abramovsky
  • Rachel Griffith

Abstract

This paper considers the impact that information and communication technology (ICT) has on firms' choices over organisational form. In particular, the decision over whether to produce in-house or outsource services, and the decision over the location of activity. ICT reduces the transaction and adjustment costs of moving activity outside the firm, and of carrying it out at greater geographicdistance. We find that more ICT-intensive firms purchase a greater amount of services on the market and they are more likely to purchase offshore than less ICT-intensive firms. (JEL: D21, F23, L23) (c) 2006 by the European Economic Association.

Suggested Citation

  • Laura Abramovsky & Rachel Griffith, 2006. "Outsourcing and Offshoring of Business Services: How Important is ICT?," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 594-601, 04-05.
  • Handle: RePEc:tpr:jeurec:v:4:y:2006:i:2-3:p:594-601
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    References listed on IDEAS

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    1. Sawyer, Malcolm (ed.), 2004. "The UK Economy," OUP Catalogue, Oxford University Press, edition 16, number 9780199266517.
    2. Griffith, Rachel, 1999. "Using the ARD Establishment Level Data to Look at Foreign Ownership and Productivity in the United Kingdom," Economic Journal, Royal Economic Society, vol. 109(456), pages 416-442, June.
    3. Pol Antras & Elhanan Helpman, 2004. "Global Sourcing," Journal of Political Economy, University of Chicago Press, pages 552-580.
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    5. George P. Baker & Thomas N. Hubbard, 2002. "Make Versus Buy in Trucking: Asset Ownership, Job Design and Information," NBER Working Papers 8727, National Bureau of Economic Research, Inc.
    6. Susanto Basu & John G. Fernald & Nicholas Oulton & Sylaja Srinivasan, 2003. "The Case of the Missing Productivity Growth: Or, Does Information technology explain why productivity accelerated in the United States but not the United Kingdom?," Harvard Institute of Economic Research Working Papers 2021, Harvard - Institute of Economic Research.
    7. Robert C. Feenstra, 1998. "Integration of Trade and Disintegration of Production in the Global Economy," Journal of Economic Perspectives, American Economic Association, pages 31-50.
    8. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817.
    9. repec:hrv:faseco:4784029 is not listed on IDEAS
    10. Marin, Dalia & Verdier, Thierry, 2006. "Corporate Hierarchies and the Size of Nations: Theory and Evidence," Discussion Papers in Economics 1346, University of Munich, Department of Economics.
    11. Dalia Marin & Thierry Verdier, 2003. "Globalization and the New Enterprise," Journal of the European Economic Association, MIT Press, pages 337-344.
    12. Bartel, Ann P & Lach, Saul & Sicherman, Nachum, 2005. "Outsourcing and Technological Change," CEPR Discussion Papers 5082, C.E.P.R. Discussion Papers.
    13. Milgrom, Paul & Roberts, John, 1990. "The Economics of Modern Manufacturing: Technology, Strategy, and Organization," American Economic Review, American Economic Association, pages 511-528.
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    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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