The Role of Institutions and Networks in Firms' Offshoring Decisions

Arbeitspapier

The offshoring of production by multinational firms has expanded dramatically in recent decades, increasing the potential for economic growth and technological transfers. What determines the location of such offshore production? How do the policies and characteristics of countries affect these decisions? Do firms choose specific countries because of their policies or because they are more familiar with them? In this paper, we use a very rich dataset on Danish firms to analyze how their decisions regarding offshore production depend on institutional characteristics and firm-specific bilateral connections with these countries. We find that institutions that enhance investor protections and reduce corruption increase the probability of offshoring, while those that introduce regulatory constraints in the labor market discourage it. We also show that offshoring activities are more likely for firms that have developed networks in the country of destination.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working paper ; No. 4-2018

Classification and Topics

• Classification: Wirtschaft ; Trade and Labor Market Interactions ; Human Capital; Skills; Occupational Choice; Labor Productivity ; Wages, Compensation, and Labor Costs: Public Policy
• Subject: Offshoring ; product market ; labor regulations ; network ; fixed costs

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Moriconi, Simone ; Peri, Giovanni ; Pozzoli, Dario
• Event: Veröffentlichung
• (who): Copenhagen Business School (CBS), Department of Economics
• (where): Frederiksberg
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/208584
• Last update: 10.03.2025, 11:44 AM CET