Does ICT Investment Spur or Hamper Offshoring? Empirical Evidence from Microdata

Luigi Benfratello, Tiziano Razzolini () and Alessandro Sembenelli

No 276, Development Working Papers from Centro Studi Luca d'Agliano, University of Milano

Abstract: In this paper we provide empirical evidence on the effect of ICT investment on the propensity to offshore for a large sample of Italian manufacturing firms. Contrary to previous literature focussing on the service sector, after taking into account the endogeneity of ICT investment in the offshoring decision equation we find a negative and significant effect of ICT on the propensity to offshore some stages of the production process. Furthermore this effect turns out not to depend on the type of ICT investment and applies both to hardware and software/telecommunication expenditures. A potential explanation for our finding is that ICT investments in manufacturing increase the complementarity of production processes within the firm, thereby reducing the incentive to offshore. Our results seem therefore to suggest that negative exogenous shocks to ICT prices–possibly induced by targeted policy programs aimed at the diffusion of ICT technologies–do not favor offshoring of manufacturing activities.

Keywords: ICT Investment; Offshoring; Maximum Likelihood System Estimation (search for similar items in EconPapers)
JEL-codes: C34 C35 F20 L23 (search for similar items in EconPapers)
Pages: 36
Date: 2009-07-31
New Economics Papers: this item is included in nep-sbm
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Citations: View citations in EconPapers (6)

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Related works:
Working Paper: Does ICT Investment Spur or Hamper Offshoring? Empirical Evidence from Microdata (2015)
Working Paper: Does ICT Investment Spur or Hamper Offshoring? Empirical Evidence from Microdata (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:csl:devewp:276

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