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Does ICT Investment Spur or Hamper Offshoring? Empirical Evidence from Microdata

Author

Listed:
  • Benfratello, Luigi

    (University of Naples Federico II)

  • Razzolini, Tiziano

    (University of Siena)

  • Sembenelli, Alessandro

    (University of Turin)

Abstract

We provide evidence on the effect of ICT investment on the propensity to offshore for a sample of Italian manufacturing firms. To deal with the endogeneity of ICT investment we adopt an innovative identification strategy based on the availability of local broad band facilities. Contrary to previous literature focusing on services, we find a negative effect of ICT on offshoring. Furthermore, when splitting the sample according to the technological level, the effect is negative and significant only in the sub-sample of low-tech firms. This suggests that ICT capital substitutes for foreign workers in performing routine tasks in low-tech industries.

Suggested Citation

  • Benfratello, Luigi & Razzolini, Tiziano & Sembenelli, Alessandro, 2015. "Does ICT Investment Spur or Hamper Offshoring? Empirical Evidence from Microdata," IZA Discussion Papers 9239, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp9239
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    Cited by:

    1. Fabienne Rasel, 2017. "ICT and global sourcing – evidence for German manufacturing and service firms," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 26(7), pages 634-660, October.
    2. Gavin Murphy & Iulia Siedschlag, 2015. "Determinants of R&D offshoring," JRC Working Papers on Corporate R&D and Innovation 2015-02, Joint Research Centre.
    3. Andrea F. Presbitero & Matteo G. Richiardi & Alessia A. Amighini, 2015. "Is labor flexibility a substitute to offshoring? Evidence from Italian manufacturing," International Economics, CEPII research center, issue 142, pages 81-93.
    4. Valeria Gattai, 2015. "Internationalisation and performance at the firm-level: what we learn from Italy," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 42(4), pages 475-509, December.
    5. Valeria Gattai & Valentina Trovato, 2014. "Estimating sourcing premia with Italian regional data," Working Papers 276, University of Milano-Bicocca, Department of Economics, revised Jun 2014.
    6. Gueyon Kim & Dohyeon Lee, 2020. "Offshoring and Segregation by Skill: Theory and Evidence," Working Papers 2020-073, Human Capital and Economic Opportunity Working Group.
    7. Gavin Murphy & Iulia Siedschlag, 2018. "Determinants of R&D offshoring: firm-level evidence from a small open economy," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 35(2), pages 529-553, August.
    8. Igna, Ioana A. & Rincon-Aznar, Ana & Venturini, Francesco, 2019. "Upstream regulation, factor demand and productivity: Cross-industry differences in OECD countries, 1975–2007," Information Economics and Policy, Elsevier, vol. 49(C).
    9. Rasel, Fabienne, 2012. "Offshoring and ICT: Evidence for German manufacturing and service firms," ZEW Discussion Papers 12-087, ZEW - Leibniz Centre for European Economic Research.
    10. Valeria Gattai, 2015. "Foreign exposure and heterogeneous performance of Italian firms: A survey of the empirical literature (1992-2014)," Working Papers 300, University of Milano-Bicocca, Department of Economics, revised Apr 2015.

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    More about this item

    Keywords

    ICT Investment; offshoring; maximum likelihood system estimation;
    All these keywords.

    JEL classification:

    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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