Managing export complexity: the role of service outsourcing

Giuseppe Berlingieri and Frank Pisch

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Exporting involves sunk and fixed costs in the form of service inputs, and whether such services are 'made' in-house or 'bought' from external agencies is a key organizational margin: it is not a core-competence of manufacturing companies and has far-reaching implications for the costs of exporting. We study such outsourcing decisions both conceptually and empirically. For guidance, we propose a theoretical framework in which firms trade off managerial strain (internal provision) and ex-post adaptation costs (external provision). Using confidential firm-level data from France and a novel instrumental variables strategy, we document the precise service inputs needed to access foreign markets and provide empirical evidence that these are typically outsourced. In line with the model, this pattern is strong for services with high costs of adaptation, and when firms have little managerial capability available. Finally, we discuss the implications of our findings for servitization and inequality.

Keywords: adaptation; complexity; core competencies; firm boundaries; firm capabilities; sunk and fixed export costs; professional and business services; structural transformation (search for similar items in EconPapers)
JEL-codes: D23 F10 L22 L23 L24 L84 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2022-04-06
New Economics Papers: this item is included in nep-bec and nep-int
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http://eprints.lse.ac.uk/117832/ Open access version. (application/pdf)

Related works:
Working Paper: Managing export complexity: the role of service outsourcing (2022)
Working Paper: Managing Export Complexity: The Role of Service Outsourcing (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:117832

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