Firms' Use of Outside Contractors: Theory and Evidence

Section: Bpo and Firm Performancementioning

confidence: 99%

The Impact of Business Process Outsourcing on Firm Performance and the Influence of Governance: A Long Term Study in the German Banking Industry

Fritsch

Wahrenburg²,

Hackethal

et al. 2007

“…As a consequence, protecting the secrecy of R&D information is a crucial concern in industrial organization. 1 While close monitoring and career concerns can help to mitigate the leakage of information caused by its own employees, a firm is particularly vulnerable to this problem when it interacts with the external world, and in particular when outsiders collaborate in the production process. 2 On the other hand, a vast literature documents how increasing specialization and economies of scale induce firms to rely on outsourcing for an expanding number of productive activities, including even temporary workers.…”

Section: Introductionmentioning

confidence: 99%

“…Since the value of the information acquired by contractors depends on the strategic choices of all their clients, this paper tackles these questions using a general equilibrium approach. This allows to derive the market value of information and to study the characteristics of the downstream market 1 See Levin et al (1987) for a survey on how firmstypically rely on secrecy rather than patents to appropriate the returns of R&D.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Outsourcing, Information Leakage and Consulting Firms

Baccara

2005

This paper offers a general equilibrium model to analyze the problem of R&D investment of firms that also face the decision between outsourcing and in-house production in the presence of R&D information leakage. A contractor hired by a firm learns the firm's technology and can diffuse the information to other firms, either by selling it or by "spilling" it involuntarily. I find that information leakage concerns tend to concentrate the outsourcing market with respect to a situation in which information leakage is not present. In particular, despite the fact that the original outsourcing market is perfectly competitive, I find that when a market for information arises in equilibrium, such a market is always monopolistic. I show that a market for information arises when contractors have a positive but low degree of control on the information they hold. If contractors do not have any control on the information they hold, the market splits into a positive measure of technologically advanced firms that never outsource and a positive measure of low-tech firms that always outsource. If contractors have full information control, all firms invest in technology and outsource, and a market for information never arises. The structure of the equilibria of the model captures several features observable in the management consulting industry.

“…Work by Abraham and Taylor (1996) found that a variety of factors influence the use of temporary workers with direct labor costs playing a relatively minor role. Companies who use temps most often mention that convenience and flexibility matter more in their choice.…”

mentioning

confidence: 99%

Temporary Employment and the Natural Rate of Unemployment

Otoo

2000

This paper examines the determinants of the natural rate of unemployment using a combined cross section and time series data set. The results suggest that industry composition affects the natural rate. In particular, a higher share of temporary employment in a local labor market tends to lower the natural rate of unemployment--most likely through the matching function. The results suggest that the increase in the share of temporary employment may have reduced the natural rate as much as 1/4 percentage point.The results also indicate that unemployment insurance benefits tend to boost the natural rate, while having a more highly educated work force tends to lower it. However, the degree of union presence in a local labor market had little impact on the natural rate.