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Does Outsourcing Increase Profitability?

Holger Görg () and Aoife Hanley

No 1372, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We investigate the relationship between outsourcing and profitability paying particular attention to the endogeneity of outsourcing. The empirical analysis uses unique plant level data for the electronics sector in Ireland. A particular feature of the data is that it records detailed information for 12 electronics sub-sectors covering both manufacturing and services activities. We distinguish outsourcing of materials from outsourcing of services inputs. We find that plants that are substantially larger than the mean employment size benefit from outsourcing materials and services inputs, while this does not appear to be the case for small plants. Results for outsourcing of services are not as clear-cut, however.

Keywords: outsourcing; subcontracting; profitability; electronics (search for similar items in EconPapers)
JEL-codes: L23 L63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc and nep-bec
Date: 2004-10
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Published in: Economic and Social Review, 2004, 35(3), 267-288

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