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Services outsourcing and innovation: An empirical investigation

Holger Görg and Aoife Hanley

No 1417, Kiel Working Papers from Kiel Institute for the World Economy (IfW)

Abstract: We provide a comprehensive empirical analysis of the links between international services outsourcing, domestic outsourcing, profits and innovation using plant level data. We find a positive effect of international outsourcing of services on innovative activity at the plant level. Such a positive effect can also be observed for domestic outsourcing of services, but the magnitude is smaller. This makes intuitive sense, as international outsourcing allows more scope for exploiting international factor price differentials, therefore giving the establishment higher profits and more scope to restructure production activities towards innovation. We also find that international outsourcing has a positive effect on profitability, as predicted by theory, while this is not true for domestic sourcing. The results are robust to various specifications and an instrumental variables analysis.

Keywords: R&D; international services outsourcing; innovation (search for similar items in EconPapers)
JEL-codes: O31 F14 (search for similar items in EconPapers)
Date: 2008
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https://www.econstor.eu/bitstream/10419/4260/1/kap_1417_Goerg_Hanley.pdf (application/pdf)

Related works:
Journal Article: SERVICES OUTSOURCING AND INNOVATION: AN EMPIRICAL INVESTIGATION (2011)
Working Paper: Services outsourcing and innovation: An empirical investigation (2009) Downloads
Working Paper: Services Outsourcing and Innovation: An Empirical Investigation (2009) Downloads
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