What factors determine the outsourcing intensity? A dynamic panel data approach for manufacturing industries

Abstract

The present paper investigates the determinants of outsourcing production using a panel of 93 Spanish manufacturing industries for the period 1993-2002. Outsourcing is measured as production tasks which are contracting out to external suppliers, a more direct and suitable indicator. After controlling for unobserved heterogeneity and simultaneity, our results show a high persistence of the outsourcing intensity. Moreover, outsourcing of production is positively related to unit labour costs, skills requirements, national ownership and orientation to international markets. We also find evidence for a negative link between the outsourcing intensity and the share of small firms.