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Spatial Agglomeration, Technology and Outsourcing of Knowledge Intensive Business Services Empirical Insights from Italy

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Author Info
Roberto Antonietti (University of Bologna)
Giulio Cainelli (University of Bari and CERIS-CNR)

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Abstract

Aim of this paper is to explore the main drivers of outsourcing of knowledge intensive business services by Italian manufacturing firms. While anecdotal and empirical evidence has emphasized labour cost and scale economies as behind firms’ choices to outsource production or service activities, here we focus on spatial agglomeration and technology as important factors. Using microeconomic data on a repeated cross-section of Italian manufacturing firms for the period 1998-2003, we develop a two-stage model in order to avoid selection bias: first, we estimate the determinants of the firm's decision to outsource business-related services; second, we estimate the main factors underlying the intensity and complexity of KIBS outsourcing, expressed by the number of service activities that are externalized. Our results show that labour cost-savings are not relevant in driving the decision to outsource KIBS, but ICT, R&D and location within a dense and technologically developed industrial district have very positive effects.

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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2007.79.

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Date of creation: Jul 2007
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Handle: RePEc:fem:femwpa:2007.79

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Related research
Keywords: KIBS; Service Outsourcing; R&D; ICT; Spatial Agglomeration;

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Find related papers by JEL classification:
L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
L84 - Industrial Organization - - Industry Studies: Services - - - Personal, Professional, and Business Services
R32 - Urban, Rural, and Regional Economics - - Production Analysis and Firm Location - - - Other Production and Pricing Analysis
R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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References listed on IDEAS
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  1. Bartel, Ann P & Lach, Saul & Sicherman, Nachum, 2005. "Outsourcing and Technological Change," CEPR Discussion Papers 5082, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Ciccone, Antonio & Hall, Robert E, 1996. "Productivity and the Density of Economic Activity," American Economic Review, American Economic Association, vol. 86(1), pages 54-70, March. [Downloadable!] (restricted)
    Other versions:
  3. Sourafel Girma & Holger Görg, 2004. "Outsourcing, Foreign Ownership, and Productivity: Evidence from UK Establishment-level Data," Review of International Economics, Blackwell Publishing, vol. 12(5), pages 817-832, November. [Downloadable!] (restricted)
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  4. Raffaello Bronzini, 2004. "Foreign Direct Investment and Agglomeration: Evidence from Italy," ERSA conference papers ersa04p321, European Regional Science Association. [Downloadable!]
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  5. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January. [Downloadable!] (restricted)
  6. Head, Keith & Ries, John & Swenson, Deborah, 1995. "Agglomeration benefits and location choice: Evidence from Japanese manufacturing investments in the United States," Journal of International Economics, Elsevier, vol. 38(3-4), pages 223-247, May. [Downloadable!] (restricted)
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  7. Robert C. Feenstra & Gordon H. Hanson, 1996. "Globalization, Outsourcing, and Wage Inequality," NBER Working Papers 5424, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Glaeser, Edward L & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1992. "Growth in Cities," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1126-52, December. [Downloadable!] (restricted)
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    • Edward L. Glaeser & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1991. "Growth in Cities," NBER Working Papers 3787, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Giulio Cainelli & Rinaldo Evangelista & Maria Savona, 2006. "Innovation and economic performance in services: a firm-level analysis," Cambridge Journal of Economics, Oxford University Press, vol. 30(3), pages 435-458, May. [Downloadable!] (restricted)
  10. Muller, Emmanuel & Zenker, Andrea, 2001. "Business services as actors of knowledge transformation: the role of KIBS in regional and national innovation systems," Research Policy, Elsevier, vol. 30(9), pages 1501-1516, December. [Downloadable!] (restricted)
  11. Gene M. Grossman & Esteban Rossi-Hansberg, 2006. "Trading Tasks: A Simple Theory of Offshoring," NBER Working Papers 12721, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Ottati, Gabi Dei, 1994. "Trust, Interlinking Transactions and Credit in the Industrial District," Cambridge Journal of Economics, Oxford University Press, vol. 18(6), pages 529-46, December.
  13. Mary Amiti & Shang-Jin Wei, 2004. "Fear of Service Outsourcing: Is It Justified?," NBER Working Papers 10808, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  14. Abraham, Katharine G & Taylor, Susan K, 1996. "Firms' Use of Outside Contractors: Theory and Evidence," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 394-424, July. [Downloadable!] (restricted)
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  15. Görg, Holger & Hanley, Aoife, 2004. "Does Outsourcing Increase Profitability?," IZA Discussion Papers 1372, Institute for the Study of Labor (IZA). [Downloadable!]
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  16. Stefano Federico, 2006. "The internationalization of Italian production and industrial districts: an analysis of direct investment abroad," Temi di discussione (Economic working papers) 592, Bank of Italy, Economic Research Department. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Paul L. Robertson & David Jacobson & Richard N. Langlois, 2008. "Innovation Processes and Industrial Districts," Working papers 2008-03, University of Connecticut, Department of Economics. [Downloadable!]
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