Global sourcing, productivity and export intensity

Abstract

AbstractThis paper investigates the effect of global sourcing on firm performances by using data on Danish manufacturing firms during the period 1995–2006. The results show that firms with better ex‐ante characteristics are more inclined to source intermediate inputs from abroad. The results also show that firms that source from different locations possess different ex‐ante characteristics; the most productive source inputs from high‐wage countries while capital stock and being an exporter are more important factors when sourcing from low‐wage countries. Moreover, controlling for the endogeneity of both the sourcing decision and location by using instrument variable and DiD matching approach, the results seem also to suggest that firms that source inputs from high‐wage countries benefited from doing so in terms of higher growth of productivity and export intensity. Firms that source inputs from low‐wage countries, on the other hand, seem not to have experienced any significant impact on neither productivity nor export, not even three years after they started to source inputs from these countries.