Firm Heterogeneity in the Choice of Offshoring: Evidence from Korean Manufacturing Firms

Abstract

Using firm-level data on offshoring of Korean manufacturers, this paper examines the relationship between firm heterogeneity and the probability of adopting offshoring. The results of the paper suggest that firm productivity may not be an important determinant for Korean firms' offshoring decision. A firm's global sourcing decision may rather depend on other characteristics such as factor intensity, research and development (R&D) intensity, information and communication technology (ICT) level, and affiliation with foreign markets when industry specificity is controlled for. (c) 2010 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.

Is labor flexibility a substitute to offshoring? Evidence from Italian manufacturing

“…the equation is underidentified). The Kleibergen-Paap rk Wald Fstatistic tests for weak identification (Baum et al, 2010 domestically (according to estimates reported in column 4), a result consistent with the descriptive statistics (Table 1) and with the literature pointing out the fixed costs of delocalization (Tomiura, 2005;Dìaz-Mora, 2008;Hyun, 2010;Jabbour, 2013). 23 While firm size is usually a good predictor of firm's internationalization, the coefficient on SIZE is significant only in the probit models, while not in the OLS and 2SLS estimates.…”

“…In contrast with the main finding discussed by the firms' internationalization literature (Tomiura, 2005;Dìaz-Mora, 2008;Barba Navaretti et al, 2008;Hyun, 2010;Cusmano et al, 2010), exportoriented and innovative firms are not statistically more likely to delocalize the production process than other firms. However, when considering contemporaneous rather than lagged values, we again find evidence supporting the stylized facts that exporting and innovative firms are more likely to offshore than firms which sell all their production in Italy and do not introduce product or process innovations.…”

“…Hyun (2010) confirms, for Korean manufacturers, that offshoring is more frequent among firms that are larger, engage more in R&D, use more ICT, and have higher labor intensity, while he does not find an association with productivity. Using French data, Corcos et al (2013) find that intra-firm imports are more likely among highly productive, capital-intensive and skill-intensive firms.…”

“…The SMF is a large survey of about 3800 Italian manufacturing firms with more than 10 employees and includes several information on firms' internationalization and labor force composition over a 3-year period. As common in the literature (Cusmano et al, 2010;Hyun, 2010;Capasso et al, 2013;Corcos et al, 2013), we classify firms using a binary variable that identifies offshorers as the firms who explicitly state that they perform part of their production process abroad. 12 As for labor force composition, the SMF provides detailed information on the number of temporary and project workers at the firm level.…”

ICT and Global Sourcing - Evidence for German Manufacturing and Service Firms

“…Using firm-level data from the United Kingdom, Abramovsky and Griffith (2006) find that firms with higher investments in ICT and using the Internet to order goods or services outsource more business services and are more likely to offshore them, too. For Korean manufacturers, an ICT level of at least using the Internet for e-commerce is positively related to the offshoring decision, in particular for offshoring from the own foreign affiliate (Hyun (2010)). Two firm-level studies for the U.S. and for Italy present more mixed results for the effect of ICT on global sourcing: For U.S. manufacturers, Fort (2015) finds that the use of electronic communication networks has a positive significant effect on production fragmentation and consequently on sourcing from an external supplier.…”