IT Outsourcing in Finnish Business

Mika Maliranta, Petri Rouvinen and Aarno Airaksinen

No 1140, Discussion Papers from The Research Institute of the Finnish Economy

Abstract: This paper reviews the characteristics and magnitude of information technology (IT) outsourcing as well as studies its labor productivity effects with a representative sample of Finnish businesses. Depending on the IT task in question, on average from one-third to two-thirds of IT has been outsourced; of the ten categories considered, the development of non-Internet business-to-business applications (e.g., EDI) is the leading activity in this respect. The various dimensions of IT outsourcing are all highly positively correlated. After controlling for industry and regional effects as well as characteristics of firms and their employees, it is found that an externally-supported computer user is about 20% more productive than an otherwise similar worker without a computer, which corresponds to about 5% output elasticity of outsourced IT; the effect of internally-supported computer use is not statistically significantly different for zero, and it is also several times smaller in magnitude. While the issues of causality, timing, self-selection, and unobserved firm heterogeneity are not fully addressed, the findings nevertheless suggest that IT outsourcing may have significant economic consequences.

Keywords: labor productivity; information technology; computers; outsourcing Finnish business (search for similar items in EconPapers)
JEL-codes: D23 D24 L14 L24 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2008
New Economics Papers: this item is included in nep-knm and nep-lab
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Citations: View citations in EconPapers (3)

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