Does offshoring boost productivity?

It's a good question. Karsten Bjerring Olsen, noting that "the impacts on productivity [of offshoring] ..have received only little attention", offers a useful survey of the literature in a new OECD paper Productivity impacts of offshoring and outsourcing:a review (PDF).

This paper surveys the empirical literature on offshore outsourcing and its productivity effects. Due to the small number of existing studies, the survey also includes research that may serve as indirect evidence of the phenomenon’s link to productivity, such as its effect on skill upgrading.

The most apparent conclusion drawn from the review is that there appears to be no clear patterns as to how offshore outsourcing affects productivity, and that much depends on both sector and firm-specific characteristics. There are some indications, however, that positive productivity effects from foreign material sourcing depends on the degree to which firms are already globally engaged, but also that such engagements generally could be close to their optimum level in developed economies.

There is little existing research on offshoring of services, but it appears that its productivity enhancing effects generally are small in manufacturing plants while being of a somewhat greater magnitude for firms in the services sector.

Looks to me like more research is needed.

Comments

[Marty]

How does this track with you previous post in which Italians and French economist saw a positive trend in terms of productivity in outsourcing low-cost manufacturing? It took me a while to slog through the first paper, and now there is another I need to read. Thanks a lot :)

[Greet Verellen]

It depends on the quality of the work and delivery of the outsourcing company, whether it is really helping in boosting the productivity. Thanks for sharing your post regarding offshore outsourcing.

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