Abstract
This paper analyzes the effect of offshore outsourcing on the export performance of firms, based on the theories of international business, the resource-based view of the firm and the transaction cost theory.Outsourcing can reduce production costs and increase flexibility. It can also provide new resources and market knowledge. However, the impact of offshore outsourcing depends on the resources and capabilities of firms to manage a network of foreign suppliers, and to absorb knowledge of foreign markets. Using a database of about 1,000 manufacturing companies in Mexico in 2011, we found that offshore outsourcing increases the performance of exports. The effects are stronger in export markets from which the company also imports intermediate goods.The results also show that the size of the company, the organization of intra-firm imports and export experience moderate the effects of outsourcing in a positive way.
Highlights
There is a controversy in developed countries towards more offshore outsourcing, as firms seek a competitive advantage (Kotabe & Mudambi, 2009; Nibouche & Belmokhtar, 2009), fundamentally through lower labor costs
The fundamental goal of this work was to examine the impact of offshore outsourcing on the export performance of firms
It may even be said that the findings of our work could complement findings from Di Gregorio et al (2009), which showed that in a sample of 100 small and medium-sized enterprises in the US, outsourcing abroad increases export performance
Summary
There is a controversy in developed countries towards more offshore outsourcing, as firms seek a competitive advantage (Kotabe & Mudambi, 2009; Nibouche & Belmokhtar, 2009), fundamentally through lower labor costs. This can sometimes result in a generalized belief among a large part of the population that outsourcing has negative effects, such as decelerated economic activity in the country and, as a result, lower domestic employment levels. There are macroeconomic studies, like Falk and Wolfmayr's (2008) that in the EU's framework utilizes sectorial data from seven countries in the 1995-2000 period, or Egger and Egger's (2005), in 20 manufacturing industries in Germany in the 1990-1998 period, or Cadarso, Gómez, López and Tobarra (2008), with data from 92 Spanish industrial sectors, that outsource in east countries and central Europe and EU candidates in sectors with medium to high technologic content, in the 1993-2003 period, concluding that intermediate imports in low income countries have negative effects on employment, especially in sectors requiring lower qualification. Amiti and Wei (2006) calculated the substitution elasticity between local workers and imports of intermediate goods for US data and they found, in that case, a complementary effect (positive)
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