A Novel Measure of Firm-Level Production Outsourcing

21 Pages Posted: 9 Nov 2022

See all articles by Jeremy Kovach

Jeremy Kovach

University of North Texas

Morgan Swink

Texas Christian University - M.J. Neeley School of Business

Mauricio Rodriguez

Texas Christian University

Abstract

Outsourcing is a critical area of study, as related decisions account for many of the structural changes in supply chains. However, research of the causes and impacts of outsourcing has been constrained by limited measures for outsourcing. Most outsourcing studies are operationalized at an industry level, or rely on data from surveys of small samples that focus on specific outsourced functions and processes. This paper proposes a measure of firm-level production outsourcing that is easy to estimate using readily available financial reporting data. We utilize a stochastic production function to estimate the amount of each firm’s output that is unaccounted for by their use of capital and labor and partition this residual into firm-specific productivity and outsourcing endeavors. Our analysis indicates that the proposed measure is valid and substantially more predictive of actual production outsourcing levels than other measures offered in the literature. This measure promises to better enable researchers to more accurately assess firm-level production outsourcing, as well as aiding their investigations into the many outsourcing antecedents, performance outcomes, and contingency effects proposed in the literature.

Keywords: outsourcing, vertical integration, supply chain management

Suggested Citation

Kovach, Jeremy and Swink, Morgan and Rodriguez, Mauricio, A Novel Measure of Firm-Level Production Outsourcing. Available at SSRN: https://ssrn.com/abstract=4272440 or http://dx.doi.org/10.2139/ssrn.4272440

Jeremy Kovach (Contact Author)

University of North Texas ( email )

1155 Union Circle #305340
Denton, TX 76203
United States

Morgan Swink

Texas Christian University - M.J. Neeley School of Business ( email )

Fort Worth, TX 76129
United States

Mauricio Rodriguez

Texas Christian University ( email )

P.O. Box 298530
Fort Worth, TX 76129
United States
817-921-7514 (Phone)
817-921-7227 (Fax)

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