Offshore-sourcing strategies and the puzzle of productivity: a micro-level analysis

Purpose - The purpose of this paper is to assess whether offshoring strategies are able to substantially enhance firms' international competitiveness in terms of productivity, innovativeness and skill composition for a panel of Italian manufacturing firms. Design/methodology/approach - A set of hypotheses derived from the extant literature is tested on data from balance sheets and qualitative surveys of about 4,000 Italian firms. The methodology used is a propensity score matching estimator and difference in differences method that allowed the authors to detect the causal effect of the offshoring status of the firms on some performance measures. Findings - Results demonstrate that offshoring increases the propensity to innovate and the skill ratio of workers but does not show a significant association with productivity growth. The estimates are robust in all the specifications. Research limitations/implications - The results are applicable to Italian firms. The magnitude and timing of the effects may vary across firms and countries. Originality/value - This paper contributes to the empirical literature on offshoring by exploring its impact on a variety of firms' performance measures by using matching techniques that allow us to investigate more in depth the causality link of the relationship and to control for the self-selection effect (more productive firms self-select to offshore).