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Outsourcing business services and the role of central administrative offices

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  • Yukako Ono

Abstract

In this paper, I study whether there is any evidence that the market scale surrounding a central administrative office (CAO), which includes corporate headquarters, influences a firm's cost-effectiveness in procuring business services. By linking plant-level data from the 1992 Annual Survey of Manufactures with CAO information from the Survey of Auxiliary Establishments, I examine manufacturing plants' practice of outsourcing services in relation to the size of the local service market surrounding the plant and that surrounding the plant's CAO. I found statistically significant evidence that the greater the size of local market surrounding a CAO, the higher the plant's probability of relying on the CAO for outsourcing advertising, bookkeeping and accounting, and legal services. These results are found even after controlling for the size of the local market surrounding a plant and plant characteristics.

Suggested Citation

  • Yukako Ono, 2002. "Outsourcing business services and the role of central administrative offices," Working Paper Series WP-02-01, Federal Reserve Bank of Chicago.
    • Handle: RePEc:fip:fedhwp:wp-02-01
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    References listed on IDEAS

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    More about this item

    Keywords

    Contracting out; Unemployment;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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