Efficiency and Outsourcing: Evidence from Australian Manufacturing

Sasan Bakhtiari ()
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Sasan Bakhtiari: School of Economics, The University of New South Wales

No 2012-07, Discussion Papers from School of Economics, The University of New South Wales

Abstract: This paper studies the role of efficiency in a firm’s decision to contract out. Emphasis is on the heterogeneous nature of firms and when firms are only considering outsourcing to domestic suppliers. Firm-level data on Australian manufacturing reveal an ordering of efficiency between firms that contract out and those that do not, in which contracting-out firms are on aggregate less efficient. The analysis further shows that firms experience improvement in their efficiency soon after contracting out, but only if their performance has been below average prior to contracting out. The results show robustness to the choice of efficiency measure, where efficiency is expressed in both productivity and cost advantage.

Keywords: Outsourcing; Productivity; Cost Advantage; Manufacturing. (search for similar items in EconPapers)
JEL-codes: D24 L21 L24 L6 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2011-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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