Production subcontracting and location

Abstract

Using data from a panel of Spanish manufacturing firms, I examine factors that explain firms' production subcontracting decisions and test whether there is any evidence that production subcontracting is facilitated in areas typically associated with higher agglomeration economies. The results show that location matters. Firms in industry agglomerations are more likely to subcontract production activities. While in general, larger and older firms as well as high wage firms show a greater probability for production subcontracting, industry agglomeration particularly facilitates subcontracting for smaller and lower wage firms and it allows firms to respond to a greater degree to expansive demand conditions by taking advantage of subcontracting.JEL classification: D21, L23, L60, R3

From Outsourcing to Productivity, Passing Through Training: Microeconometric Evidence from Italy

“…to motivations related to internal skills shortages and/or external skills availability. This evidence is in line with previous studies showing that outsourcing occurs more frequently and more intensively, when firms are located in more dense market areas (Ono, 2007;Holl, 2008;Antonietti and Cainelli, 2008;Antonietti et al, 2012;Cainelli and Iacobucci, 2012). Estimates in Table 3 Column 3 show that service outsourcing is related more to innovation drivers such as R&D, capital-embodied technology, and large firm size.…”

Outsourcing and Firm Performance: Evidence from the Italian Manufacturing Industry

“…A firm is identified as outsourcer whenever a positive, even small, expenditure is reported. Tomiura (2005) and Holl (2008) employ a similar indicator, whereas Girma and Görg (2004) use a broader measure, "the industrial services received", which includes activities such as the processing of inputs and certain services such as the maintenance of production machinery or engineering services.…”

National and Sub-National Offshoring Impact on Employment: An Application to Madrid Region

“…The exception is a study on delocalization and employment in MR (Myro et al, 2008), for 2000-2007, using their own database of manufacturing plants affected by offshoring together with results from surveys to different firms. There is, however, other studies about subcontracting at regional level for the Spanish economy as a whole (Holl, 2008) and some papers that analyze in more detail the evolution of that externalization or subcontracting for particular industries, like electronics, with a special relevance in MR (Suárez-Villa andRama, 1996 andRama et al, 2003).…”

“…This is explained by the spread of the externalization and subcontracting as common firms strategies to obtain cost reductions, specialization and scale economies. This process is taking place more acutely in MR because industrial concentration areas induce firms' externalization and delocalization processes, mainly for the ones with smaller size (see Holl, 2008, for the precise analysis of the effect of industrial agglomerations on subcontracting; and Villa and Rama, 1996). 9 As we have done for other studies for the Spanish economy (see for example Cadarso et al, 2008a).…”