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Does ICT Investment Spur or Hamper Offshoring? Empirical Evidence from Microdata

  • Luigi Benfratello

    (University of Turin and Ceris-CNR)

  • Tiziano Razzolini

    (University of Siena)

  • Alessandro Sembenelli

    (University of Turin and Collegio Carlo Alberto)

In this paper we provide empirical evidence on the effect of ICT investment on the propensity to offshore for a large sample of Italian manufacturing firms. Contrary to previous literature focussing on the service sector, after taking into account the endogeneity of ICT investment in the offshoring decision equation we find a negative and significant effect of ICT on the propensity to offshore some stages of the production process. Furthermore this effect turns out not to depend on the type of ICT investment and applies both to hardware and software/telecommunication expenditures. A potential explanation for our finding is that ICT investments in manufacturing increase the complementarity of production processes within the firm, thereby reducing the incentive to offshore. Our results seem therefore to suggest that negative exogenous shocks to ICT prices–possibly induced by targeted policy programs aimed at the diffusion of ICT technologies–do not favor offshoring of manufacturing activities.

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Paper provided by Centro Studi Luca d\'Agliano, University of Milano in its series Development Working Papers with number 276.

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Length: 36
Date of creation: 31 Jul 2009
Date of revision:
Handle: RePEc:csl:devewp:276
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