Does outsourcing increase labour productivity? Evidence for a local production system in Emilia Romagna (Italy)

It is the purpose of this paper to contribute filling this gap. In particular, by providing some evidence on the impact that outsourcing has on the labour productivity of firms “embedded” in a LPS characterized by idiosyncratic techno-economic and organizational features. In so doing, the paper aims at testing whether this local embeddedness might make the productivity impact of outsourcing dependent on factors, which are not usually considered in the analysis of big-companies, such as the specialization pattern of the LPS, its labour division and organization, and its innovative profile. More precisely, a diachronic cross-section econometric model of the productivity impact of outsourcing is applied to a sample of firms based in a LPS of the Italian region of Emilia Romagna (Reggio Emilia province), for which survey-based outsourcing and balance-sheet data have been collected in the period 1998-2005. Its results are quite interesting: the main conclusions drawn by the theoretical and empirical literature in a big-company context end up with being mitigated, if not even reversed, in a LPS environment, suggesting new and original strategic implications. The paper is organized as follows. Section 13.2 outlines the issue and briefly presents the “ambiguous” link between outsourcing and firm performance (productivity, in particular) which emerges from the literature. Section 13.3 briefly describes the dataset and presents the econometric model. Section 13.4 comments the main empirical results. Some final remarks (Section 13.5) close the paper.