An Empirical Analysis of Motives for Offshore Outsourcing by U.S. Firms

20 Pages Posted: 3 Oct 2008

See all articles by Donna L. Paul

Donna L. Paul

Washington State University

Rossitza B. Wooster

Portland State University

Date Written: September 2008

Abstract

In light of the political debate on offshore outsourcing, this paper examines firm financial characteristics associated the probability of being identified as an outsourcer. In a sample of S&P 500 firms, we find that firms identified as outsourcers operate in more competitive industries, have relatively worse operating performance, higher administrative overhead, and higher labor overhead. These firm characteristics are consistent with cost-cutting objectives and the need to respond to competitive pressures. We also find that outsourcing firms have a higher rate of growth in operating performance from 2003-2006. From a policy perspective, our results suggest that the political pressure to limit firms' ability to offshore outsource will likely reduce their flexibility to respond to operating and competitive challenges.

Keywords: Outsourcing, Offshoring

JEL Classification: F23

Suggested Citation

Paul, Donna L. and Wooster, Rossitza B., An Empirical Analysis of Motives for Offshore Outsourcing by U.S. Firms (September 2008). Available at SSRN: https://ssrn.com/abstract=1271784 or http://dx.doi.org/10.2139/ssrn.1271784

Donna L. Paul

Washington State University ( email )

Carson College of Business
WA
United States

Rossitza B. Wooster (Contact Author)

Portland State University ( email )

Department of Economics
P.O.Box 751
Portland, OR 97207
United States
503.725.3944 (Phone)
503.725.3945 (Fax)

HOME PAGE: http://web.pdx.edu/~wooster/

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