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Does Outsourcing Increase Profitability?

Author

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  • Görg, Holger

    () (Kiel Institute for the World Economy)

  • Hanley, Aoife

    () (Kiel Institute for the World Economy)

Abstract

We investigate the relationship between outsourcing and profitability paying particular attention to the endogeneity of outsourcing. The empirical analysis uses unique plant level data for the electronics sector in Ireland. A particular feature of the data is that it records detailed information for 12 electronics sub-sectors covering both manufacturing and services activities. We distinguish outsourcing of materials from outsourcing of services inputs. We find that plants that are substantially larger than the mean employment size benefit from outsourcing materials and services inputs, while this does not appear to be the case for small plants. Results for outsourcing of services are not as clear-cut, however.

Suggested Citation

  • Görg, Holger & Hanley, Aoife, 2004. "Does Outsourcing Increase Profitability?," IZA Discussion Papers 1372, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp1372
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    References listed on IDEAS

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    More about this item

    Keywords

    outsourcing; subcontracting; profitability; electronics;

    JEL classification:

    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L63 - Industrial Organization - - Industry Studies: Manufacturing - - - Microelectronics; Computers; Communications Equipment

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