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Innovation and the geographical and functional dimensions of outsourcing: An empirical investigation based on Italian firm level data

Author

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  • Lucia Cusmano

    ()

  • Maria Luisa Mancasi

    ()

  • Andrea Morrison

    ()

Abstract

The paper investigates the diversified patterns of outsourcing in the Lombardy region and relates them to the probability of introducing product and process innovation. Based on a large firm-level survey, we show that outsourcing processes are strongly regionally embedded and that offshoring is still a limited phenomenon. Outsourcing strategies are shown to have a positive impact on firms’ innovation. In particular, the outsourcing of service activities contributes the most to innovation, thus suggesting that firms successfully pursue core strengthening strategies. Our econometric estimates show that both geographical and organizational proximity matter. Indeed, the positive association of services with innovation is strongly related to their regional dimension, which points toward the importance of local user-producer relationships. When outsourcing crosses national borders, keeping the outsourced activities at least loosely connected to the firm appears critical, as offshoring to non affiliated firms has a clear negative impact on innovation.

Suggested Citation

  • Lucia Cusmano & Maria Luisa Mancasi & Andrea Morrison, 2008. "Innovation and the geographical and functional dimensions of outsourcing: An empirical investigation based on Italian firm level data," Papers in Evolutionary Economic Geography (PEEG) 0806, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Apr 2008.
  • Handle: RePEc:egu:wpaper:0806
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    File URL: http://econ.geo.uu.nl/peeg/peeg0806.pdf
    File Function: Version April 2008
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    Cited by:

    1. Foster-McGregor, Neil & Kaulich, Florian & Stehrer, Robert, 2015. "Global Value Chains in Africa," MERIT Working Papers 024, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    2. Fritsch, Ursula & Görg, Holger, 2013. "Outsourcing, offshoring and innovation: Evidence from firmlevel data for emerging economies," Kiel Working Papers 1861, Kiel Institute for the World Economy (IfW).
    3. Fritsch, Ursula & Görg, Holger, 2013. "Outsourcing, Offshoring and Innovation: Evidence from Firm-level Data for Emerging Economies," CEPR Discussion Papers 9603, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    Product Innovation; Process Innovation; Outsourcing; Offshoring;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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