'Make-or-Buy' of Peripheral Services in Manufacturing: Evidence from Spanish Plant-Level Data

33 Pages Posted: 19 Jan 2013

See all articles by José Alberto Bayo Moriones

José Alberto Bayo Moriones

Public University of Navarre - Department of Business Administration

Jose E. Galdon-Sanchez

Universidad Publica de Navarra ; IZA

Ricard Gil

Queen's University (Canada) - Smith School of Business; Johns Hopkins University - Carey Business School

Abstract

In this paper we empirically explore the 'make-or-buy' decisions of peripheral services in manufacturing plants using detailed information on a data set from a new plant-level survey from 926 plants distributed in all manufacturing industries in Spain. In particular, survey respondents are asked how their contracting practices of peripheral services had changed in the last three years. The answer to this question is informative of the changes in the importance of backward integration for each of the plants interviewed.Using other information provided in the survey, we relate reported changes in backward integration to changes in other relevant plant characteristics. We show that increases in outsourcing of services are positively correlated with increases in the plant's market share as well as increases in product market competition and product prices. These findings are robust to controlling for whether plants belong to single-plant or multi-plant firms. This result is consistent with the view that market size limits the degree of specialization at the plant level in the Spanish manufacturing industry.

Keywords: make-or-buy, peripheral services, manufacturing, market share, competition, outsourcing

JEL Classification: L23, L22, L60, J29, J59

Suggested Citation

Bayo Moriones, José Alberto and Galdon-Sanchez, Jose E. and Gil, Ricard, 'Make-or-Buy' of Peripheral Services in Manufacturing: Evidence from Spanish Plant-Level Data. IZA Discussion Paper No. 7138. Available at SSRN: https://ssrn.com/abstract=2203328

José Alberto Bayo Moriones (Contact Author)

Public University of Navarre - Department of Business Administration ( email )

Campus de Arrosadia
31006 Pamplona
Spain
34 948 169 377 (Phone)
34 948 169 404 (Fax)

Jose E. Galdon-Sanchez

Universidad Publica de Navarra ( email )

Department of Economics
Campus de Arrosadia
Pamplona, Navarra 31006
Spain
+34 948 16 9338 (Phone)
+34 948 16 97 21 (Fax)

HOME PAGE: http://www.econ.unavarra.es/~galdon/

IZA

P.O. Box 7240
Bonn, D-53072
Germany

HOME PAGE: http://www.iza.org/en/webcontent/personnel/photos/index_html?key=1494

Ricard Gil

Queen's University (Canada) - Smith School of Business ( email )

Smith School of Business - Queen's University
143 Union Street
Kingston, Ontario K7L 3N6
Canada

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

HOME PAGE: http://carey.jhu.edu

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