Working paper

Entrusted Outsourcing, Productive Performance and Risks

To analyse the relationship between entrusted outsourcing and firms' productive performance, we propose a model with three equations: a selection equation for the status of the contracting firm, an equation of interest for the volume of outsourcing and an equation for performance as a function of the (estimated) amount of outsourcing.

Published on : 13/01/2014

Mis à jour le : 12/01/2025

Temps de lecture

1 minute

Based on an unbalanced sample of 27,311 French manufacturing firms over the period 1998-2007, our estimates indicate that firms' performance has a positive effect on the probability of being outsourcer. The best-performing firms are also those for which the volume of outsourcing is highest. Outsourcing improves the performance of firms in low and medium technology sectors, while it reduces performance in high and medium-high technology sectors. This reduction is particularly noticeable for the firms that turn most to subcontracting; there is a U-shaped relationship between outsourcing and performance in these sectors. We also observe that firms use outsourcing to externalise cyclical risks, but they prefer to internalise technological risks. Finally, firms do not seem to use outsourcing as a means to minimise their production costs.