Understanding the Effects of Outsourcing: Unpacking the Total Factor Productivity Variable

Production Planning & Control: The Management of Operations, 24:4-5, 308-317, 2013

Posted: 26 Oct 2014

See all articles by Ben Kitcher

Ben Kitcher

University of Sheffield

Ian P. McCarthy

Simon Fraser University (SFU) - Beedie School of Business

Sam Turner

University of Sheffield

Keith Ridgway

University of Sheffield

Date Written: May 1, 2013

Abstract

Research on why firms should outsource and how they should do it has proliferated in the past two decades, but few consistent findings have emerged concerning the benefits of outsourcing. We argue that this is in part due to the lack of an adequate framework for measuring the effects of outsourcing. To address this, we present such a framework based upon the Cobb-Douglas productivity function. We explain how our framework can be used to unpack one component of the Cobb-Douglas productivity function, the ‘total factor productivity,’ which represents the other numerous sub-variables that affect outsourcing productivity, beyond the capital and labour expenditures. We also demonstrate the framework using a simple illustrative example.

Keywords: outsourcing, Cobb–Douglas, total factor productivity, aerospace, manufacturing, Ishikawa diagram

JEL Classification: L10, L20, M10, M20, N10

Suggested Citation

Kitcher, Ben and McCarthy, Ian P. and Turner, Sam and Ridgway, Keith, Understanding the Effects of Outsourcing: Unpacking the Total Factor Productivity Variable (May 1, 2013). Production Planning & Control: The Management of Operations, 24:4-5, 308-317, 2013, Available at SSRN: https://ssrn.com/abstract=2367442

Ben Kitcher

University of Sheffield ( email )

17 Mappin Street
Sheffield, Sheffield S1 4DT
United Kingdom

Ian P. McCarthy (Contact Author)

Simon Fraser University (SFU) - Beedie School of Business ( email )

8888 University Drive
Burnaby, British Columbia V5A 1S6
Canada

Sam Turner

University of Sheffield ( email )

17 Mappin Street
Sheffield, Sheffield S1 4DT
United Kingdom

Keith Ridgway

University of Sheffield

17 Mappin Street
Sheffield, Sheffield S1 4DT
United Kingdom

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