Productivity, outsourcing and exit: the case of Australian manufacturing

Abstract

This paper uses a panel of small and medium manufacturing firms in Australia and studies the relationship between productivity and outsourcing accounting for the possibility of inefficient firms selfselecting into exit instead of outsourcing to domestic suppliers. Estimating a propensity model on an unbalanced panel of firms and correcting for the selection bias when firms opt for exit shows that the impact of productivity on the outsourcing decision could be much larger than estimated so far. The paper further explores the impact of outsourcing on a firm's future performance and finds that the effect is nonuniform and productivity dependent, and outsourcing mostly brings improvements to firms that initially had low productivities. The most productive firms seem to outsource for other reasons such as focusing on innovation and exports with an eye on longer-term returns.

Offshore-sourcing strategies and the puzzle of productivity: a micro-level analysis

“…Other works witness a reduction in labour productivity and TFP (Bernhard and Rycx, 2011;Egger and Egger, 2006;Ito et al, 2012). More recent papers that use the same methodology as ours, by controlling for the selfselection effects, find that the magnitude and timing of the effects vary by industrial sector, import/source destination country (Baldwin and Yan, 2014 for Canadian firms; Frisch and Görg, 2013 for emerging economies; Bakhtiari (2015) for Australian manufacturing. Bandick (2016) using a matching approach shows that Danish firms experience positive effects on productivity only if they offshore to highwage country but not to low-wage countries.…”

Mapping SME productivity research: a systematic review of empirical evidence and future research agenda

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Offshoring IT Services: Influencing Factors

“…Several authors has identified the many benefits of offshoring. These include cost savings (Choi and Beladi 2014, Luftman et al 2013, Zhu 2016, quality improvement (Bustinza, Arias-Aranda, andGutierrez-Gutierrez 2010, Holweg, Reichhart, andHong 2011), new innovations in product or process (Bakhtiari 2015, Nassimbeni 2006, access to input resources (Holweg, Reichhart, and Hong 2011, Nassimbeni 2006, Zeng and Rossetti 2003, access to new markets Rodriguez 2011, Rodriguez andNieto 2016), speeding up time-to-Market (McNally, Akdeniz, andCalantone, 2011, Zhu 2016), and access to new technologies Khurana 2013, Li, Liu, Li, &Wu 2008;Prikladnicki and Audy 2012).…”