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

Author

Listed:
  • Luigi Benfratello

    (University of Turin and Ceris-CNR)

  • Tiziano Razzolini

    (University of Siena)

  • Alessandro Sembenelli

    (University of Turin and Collegio Carlo Alberto)

Abstract

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.

Suggested Citation

  • Luigi Benfratello & Tiziano Razzolini & Alessandro Sembenelli, 2009. "Does ICT Investment Spur or Hamper Offshoring? Empirical Evidence from Microdata," Development Working Papers 276, Centro Studi Luca d'Agliano, University of Milano.
  • Handle: RePEc:csl:devewp:276
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    File URL: http://www.dagliano.unimi.it//media/WP2009_276.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Valeria Gattai & Valentina Trovato, 2014. "Estimating sourcing premia with Italian regional data," Working Papers 276, University of Milano-Bicocca, Department of Economics, revised Jun 2014.
    2. repec:taf:ecinnt:v:26:y:2017:i:7:p:634-660 is not listed on IDEAS
    3. Fabienne Rasel, 2017. "ICT and global sourcing – evidence for German manufacturing and service firms," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 26(7), pages 634-660, October.

    More about this item

    Keywords

    ICT Investment; Offshoring; Maximum Likelihood System Estimation;

    JEL classification:

    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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