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Olivier Bertrand (SKEMA Business School)

Olivier Bertrand (SKEMA Business School). What goes around comes around: Effects of offshore outsourcing on the export performance of firms. T. Friedman: “What goes around…”. New York Times, 2004.

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Olivier Bertrand (SKEMA Business School)

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  1. Olivier Bertrand (SKEMA Business School) What goes around comes around: Effects of offshore outsourcing on the export performance of firms

  2. T. Friedman: “What goes around…” New York Times, 2004 • “Yes, I want to be able to huff and puff about complex issues - like outsourcing of jobs to India - without any reference to reality. Unfortunately, in this life, I'm stuck in the body of a reporter/columnist. So when I came to the 24/7 Customer call center in Bangalore […] I was prepared to denounce the whole thing. […] Well, he (the founder of the company) answered patiently, ''look around this office.'' All the computers are from Compaq. The basic software is from Microsoft […] The air-conditioning is by Carrier, and even the bottled water is by Coke […] This explains why, although the U.S. has lost some service jobs to India, total exports from U.S. companies to India have grown from $2.5 billion in 1990 to $4.1 billion in 2002. What goes around comes around, and also benefits Americans.”

  3. Introduction (1) • The context • The objective of the paper • Data and definition of offshore outsourcing

  4. Introduction (2) • Main findings • Contribution of the paper: • Mol, Van Tulderc and Beije (2005) • Di Gregorio, Musteen and Thomas (2009)

  5. Background (1) • Export gains from offshore outsourcing: • Hypothesis 1: Offshore outsourcing is positively related to export performance. • Hypothesis 2: Ceteris paribus, the positive effects ofoffshore outsourcing on export performance are higher in export markets where firms import intermediate goods.

  6. Background (2) • Resources and capabilities of MNEs to outsource abroad: • Hypothesis 3:The relationship between offshore outsourcing and export performance is positively moderated by the size of the firm. • Hypothesis 4: Ceteris paribus, the positive effects ofoffshore outsourcing on export performance are higher when firms also import intermediate products within the MNE group. • Hypothesis 5: The relationship between offshore outsourcing and export performance is positively moderated by the export experience of the firm.

  7. Data and methods (1) • Firm-level data: • Echanges Internationaux Intra Groupe (EIIG) • Enquête Annuelle d’Entreprise (EAE) • Dependant variable: • Export sales (firm/country level) • (Export intensity)

  8. Data and methods (2) • Independent variables: • Outsourcing • Outsourcing * Bilateral Trade • Outsourcing * Size • Outsourcing * Intra-Firm Sourcing • Outsourcing * Export Experience • Control variables: • Size, Unit labor cost, Export experience • GDP, Geographic and cultural distance (Legal environment) • Fixed sector dummies

  9. Data and methods (3) • Excess of zeros: log (Export+1) • Cross-section analysis: • Ordinary Least Squares (OLS) model • Two-stage least squares (2SLS) model • Further robustness check • VIF test + F test

  10. Findings • Empirical support for our 5 hypotheses • Good overall fit of our empirical model

  11. Conclusion • Contribution to the field of strategy and IB • Potential implication for: • policy makers • practitioners

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