Services Outsourcing and Innovation: An Empirical Investigation

Holger Görg and Aoife Hanley

No 4404, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We provide a comprehensive empirical analysis of the links between international services outsourcing, domestic outsourcing, profits and innovation using plant level data. We find a positive effect of international outsourcing of services on innovative activity at the plant level. Such a positive effect can also be observed for domestic outsourcing of services, but the magnitude is smaller. This makes intuitive sense, as international outsourcing allows more scope for exploiting international factor price differentials, therefore giving the establishment higher profits and more scope to restructure production activities towards innovation. We also find that international services outsourcing has a positive effect on profitability, as predicted by theory, while this is not true for domestic sourcing. The results are robust to various specifications and an instrumental variables analysis.

Keywords: offshoring; services outsourcing; innovation; R&D (search for similar items in EconPapers)
JEL-codes: F19 O31 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2009-09
New Economics Papers: this item is included in nep-ino and nep-knm
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Citations: View citations in EconPapers (6)

Published - published in: Economic Inquiry, 2011, 49(2), 321-333

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Related works:
Journal Article: SERVICES OUTSOURCING AND INNOVATION: AN EMPIRICAL INVESTIGATION (2011)
Working Paper: Services outsourcing and innovation: An empirical investigation (2009)
Working Paper: Services outsourcing and innovation: An empirical investigation (2008)
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