Does IT Outsourcing Increase Firm Success? An Empirical Assessment Using Firm-Level Data
56 Pages Posted: 17 Jan 2008 Last revised: 1 Sep 2014
Date Written: 2007
Abstract
Using German firm-level data, an endogenous switching regression model within a production function framework is estimated in order to explore differences in labor productivity between IT outsourcing and non-IT outsourcing firms. This approach takes possible complementarities between IT outsourcing and production input factors into account and further allows IT outsourcing to affect any factor of the production function. Estimation results show that IT outsourcing firms produce more efficiently than non-IT outsourcing firms. Furthermore, they have a significantly larger output elasticity with respect to computer workers. Therefore computer workers and IT outsourcing can be interpreted as complementary factors positively affecting firms' labor productivity. An additional analysis indicates that IT outsourcing, in the medium-term, has a positive effect on firms' employment growth rate.
Keywords: IT Outsourcing, Productivity, Endogenous Switching Regression, Employment Growth
JEL Classification: C21, D24, J21, J24
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
The Nature and Growth of Vertical Specialization in World Trade
By David L. Hummels, Jun Ishii, ...
-
Foreign Direct Investment and Relative Wages: Evidence from Mexico's Maquiladoras
-
Integration vs. Outsourcing in Industry Equilibrium
By Gene M. Grossman and Elhanan Helpman
-
Firms, Contracts, and Trade Structure
By Pol Antras
-
The Evolving External Orientation of Manufacturing: A Profile of Four Countries
-
The Evolving External Orientation of Manufacturing Industries: Evidence from Four Countries
-
Can Vertical Specialization Explain the Growth of World Trade?
By Kei-mu Yi