Size Evolution and Outsourcing: Theory and Evidence from Australian Manufacturing

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

No 2012-08, Discussion Papers from School of Economics, The University of New South Wales

Abstract: This paper sheds new light on the forces shaping outsourcing decision by considering a certain form of non-linearity in overhead costs which effectively discretizes a firm’s size into small and large regimes. Extending Grossman & Helpman (2002) in this line shows that firms unable to fully transition from small to large due to their level of efficiency would outsource to downsize and save on overhead costs. A panel of Australian manufacturing firms is used to construct an instrument for the transitioning firm and to test the hypothesis. In support of the theory, those firms in transition with no growth plans have stronger incentives to contract out and downsize. The findings open a new avenue to rethink growth and job creation amongst small businesses.

Keywords: Small Business; productivity; outsourcing; Overhead Cost. (search for similar items in EconPapers)
JEL-codes: C38 D23 L24 L6 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2011-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://research.economics.unsw.edu.au/RePEc/papers/2012-08.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:swe:wpaper:2012-08

Access Statistics for this paper

More papers in Discussion Papers from School of Economics, The University of New South Wales Contact information at EDIRC.
Bibliographic data for series maintained by Hongyi Li ().