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Trust your neighbour. Industrial relatedness, social capital and outsourcing

  • Roberto Antonietti
  • Maria Rosaria Ferrante
  • Riccardo Leoncini

Relying on a unique dataset of small, machine-tool firms located in Emilia Romagna, Italy, we estimate the separate effects of industrial relatedness and social capital on the propensity to fully or partially outsource production activities. We focus on a series of 29 production phases, for which we have information on whether they are accomplished in-house or outside the firm. After controlling for endogeneity, we find that: (i) full outsourcing is positively related to social capital, but this effect vanishes as industrial proximity with neighbouring firms increases; and (ii) firms engage in concurrent sourcing only when industrial relatedness with neighbouring firms is high. Also phase estimates show that: (iii) while social capital matters for full outsourcing of core activities, for full outsourcing of peripheral activities it is industrial relatedness that is relevant; and (iv) there is no significant effect of either industrial relatedness or social capital on the concurrent sourcing of core and peripheral activities.

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File URL: http://econ.geo.uu.nl/peeg/peeg1403.pdf
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Paper provided by Utrecht University, Section of Economic Geography in its series Papers in Evolutionary Economic Geography (PEEG) with number 1403.

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Length: 37 pages
Date of creation: Jan 2014
Date of revision: Jan 2014
Handle: RePEc:egu:wpaper:1403
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