The external effects of offshoring on job security in SMEs

Zouheir El-Sahli, Joakim Gullstrand () and Karin Olofsdotter ()
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Joakim Gullstrand: Lund University
Karin Olofsdotter: Lund University

Small Business Economics, 2022, vol. 59, issue 4, No 14, 1613-1640

Abstract: Abstract We investigate the effects of offshoring on job security using matched employer-employee data from Sweden. Between 1997 and 2011, the share of offshoring firms fell from around 25 to 22% while offshoring per worker within offshoring firms almost doubled. We use this variation to contribute to the literature by examining the effects of the neighboring firms’ offshoring (external offshoring) on job separation in small and medium-sized enterprises (SMEs). Our results suggest that external offshoring has a significant impact on job security in SMEs that do not offshore themselves. In addition, having a university degree, being young, and being new to the job reduce the risk of a job exit due to increased external offshoring. This result is indicative of a Schumpeterian job-restructuring effect where old jobs are replaced by newer ones. Finally, the increased risk of a job exit in SMEs suggests a higher vulnerability of these firms to local shocks due to offshoring activities in larger neighboring firms.

Keywords: Offshoring; Heterogeneous firms; Job security; Globalization; Small and medium-sized enterprises; Swedish manufacturing (search for similar items in EconPapers)
JEL-codes: F16 F66 J64 L26 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s11187-021-00578-2

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