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IT Outsourcing in Finnish Business

Author

Listed:
  • Maliranta, Mika
  • Rouvinen, Petri
  • Airaksinen, Aarno

Abstract

This paper reviews the characteristics and magnitude of information technology (IT) outsourcing as well as studies its labor productivity effects with a representative sample of Finnish businesses. Depending on the IT task in question, on average from one-third to two-thirds of IT has been outsourced; of the ten categories considered, the development of non-Internet business-to-business applications (e.g., EDI) is the leading activity in this respect. The various dimensions of IT outsourcing are all highly positively correlated. After controlling for industry and regional effects as well as characteristics of firms and their employees, it is found that an externally-supported computer user is about 20% more productive than an otherwise similar worker without a computer, which corresponds to about 5% output elasticity of outsourced IT; the effect of internally-supported computer use is not statistically significantly different for zero, and it is also several times smaller in magnitude. While the issues of causality, timing, self-selection, and unobserved firm heterogeneity are not fully addressed, the findings nevertheless suggest that IT outsourcing may have significant economic consequences.

Suggested Citation

  • Maliranta, Mika & Rouvinen, Petri & Airaksinen, Aarno, 2008. "IT Outsourcing in Finnish Business," Discussion Papers 1140, The Research Institute of the Finnish Economy.
  • Handle: RePEc:rif:dpaper:1140
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    File URL: http://www.etla.fi/wp-content/uploads/2012/09/dp1140.pdf
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    Cited by:

    1. Böckerman, Petri & Riihimäki, Elisa, 2009. "International outsourcing and labour demand: Evidence from Finnish firm-level data," MPRA Paper 16903, University Library of Munich, Germany.

    More about this item

    Keywords

    labor productivity; information technology; computers; outsourcing Finnish business;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures

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