Efficiency and Outsourcing: Evidence from Australian Manufacturing

18 Pages Posted: 17 Jan 2012

See all articles by Sasan Bakhtiari

Sasan Bakhtiari

Australian Department of Industry; Crawford School, ANU

Date Written: December 1, 2011


This paper studies the role of efficiency in a firm’s decision to contract out. Emphasis is on the heterogeneous nature of firms and when firms are only considering outsourcing to domestic suppliers. Firm-level data on Australian manufacturing reveal an ordering of efficiency between firms that contract out and those that do not, in which contracting-out firms are on aggregate less efficient. The analysis further shows that firms experience improvement in their efficiency soon after contracting out, but only if their performance has been below average prior to contracting out. The results show robustness to the choice of efficiency measure, where efficiency is expressed in both productivity and cost advantage.

Keywords: outsourcing, productivity, cost advantage, manufacturing

JEL Classification: D24, L21, L24, L6

Suggested Citation

Bakhtiari, Sasan, Efficiency and Outsourcing: Evidence from Australian Manufacturing (December 1, 2011). UNSW Australian School of Business Research Paper No. 2012ECON07. Available at SSRN: https://ssrn.com/abstract=1984394 or http://dx.doi.org/10.2139/ssrn.1984394

Sasan Bakhtiari (Contact Author)

Australian Department of Industry ( email )

341 George Street
Sydney, NSW 2000

HOME PAGE: http://sites.google.com/site/sasanbakhtiari

Crawford School, ANU ( email )

7 Liversidge Street
Lennox Crossing
Canberra, ACT 0200

HOME PAGE: http://sites.google.com/site/sasanbakhtiari

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