Kiel Working Papers, Kiel Institute for World Economics
No 1417:
Services Outsourcing and Innovation: An empirical investigation
Holger Görg and Aoife Hanley
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: international services outsourcing, innovation, R&D; (follow links to similar papers)
JEL-Codes: F14,; O31; (follow links to similar papers)
26 pages, April 2008
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