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Trust your neighbour. Industrial relatedness, social capital and outsourcing

Author

Listed:
  • Roberto Antonietti
  • Maria Rosaria Ferrante
  • Riccardo Leoncini

Abstract

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.

Suggested Citation

  • Roberto Antonietti & Maria Rosaria Ferrante & Riccardo Leoncini, 2014. "Trust your neighbour. Industrial relatedness, social capital and outsourcing," Papers in Evolutionary Economic Geography (PEEG) 1403, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Jan 2014.
  • Handle: RePEc:egu:wpaper:1403
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    File URL: http://econ.geo.uu.nl/peeg/peeg1403.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    concurrent sourcing; full outsourcing; industrial relatedness; social capital; machine-tool industry;

    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • L64 - Industrial Organization - - Industry Studies: Manufacturing - - - Other Machinery; Business Equipment; Armaments
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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