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Efficiency and Outsourcing: Evidence from Australian Manufacturing

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  • Sasan Bakhtiari

    (School of Economics, The University of New South Wales)

Abstract

This paper studies the role of efficiency in a firm’s decision to contract out. Emphasis is on the heterogeneous nature of firms and when firms are only considering outsourcing to domestic suppliers. Firm-level data on Australian manufacturing reveal an ordering of efficiency between firms that contract out and those that do not, in which contracting-out firms are on aggregate less efficient. The analysis further shows that firms experience improvement in their efficiency soon after contracting out, but only if their performance has been below average prior to contracting out. The results show robustness to the choice of efficiency measure, where efficiency is expressed in both productivity and cost advantage.

Suggested Citation

  • Sasan Bakhtiari, 2011. "Efficiency and Outsourcing: Evidence from Australian Manufacturing," Discussion Papers 2012-07, School of Economics, The University of New South Wales.
    • Handle: RePEc:swe:wpaper:2012-07
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    File URL: http://research.economics.unsw.edu.au/RePEc/papers/2012-07.pdf
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    References listed on IDEAS

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    Cited by:

    1. Sasan Bakhtiari, 2011. "Size Evolution and Outsourcing: Theory and Evidence from Australian Manufacturing," Discussion Papers 2012-08, School of Economics, The University of New South Wales.

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    More about this item

    Keywords

    Outsourcing; Productivity; Cost Advantage; Manufacturing.;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • L6 - Industrial Organization - - Industry Studies: Manufacturing

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