Global sourcing and technical efficiency – a firm-level study on the ICT industry in Sweden

Abstract

We analyse the relationship between international sourcing, measured as imports of intermediate inputs, and the technical efficiency of firms in the information and communications technologies (ICT) manufacturing industry in Sweden. Using stochastic frontier analysis, we provide evidence that global sourcing improves firms’ capabilities to combine and re-combine inputs in productive ways, thereby increasing technical efficiency. We find a robust relationship between technical efficiency and international outsourcing. First, we find that firms that are deeply integrated into global sourcing networks are closer to their own production frontier. Second, firms that are engaged in international sourcing are also closer to the industry efficiency frontier. These findings are consistent with the argument that international sourcing stimulates firms’ capabilities by enabling them to identify and adopt higher quality inputs or more efficient production and management practices. These findings also suggest that the variety and extent of firms’ global sourcing networks constitute an important source of differences in efficiency levels among firms the ICT manufacturing industry.

Keywords:

• technical efficiency
• outsourcing
• offshoring
• globalization
• variety
• learning
• recombinant capabilities
• technology transfer
• imports

JEL Classification:

• D21
• F61
• L63
• L23

Additional information

Notes on contributors

Martin Andersson

Martin ANDERSSON is professor of Industrial Economics at Blekinge Institute of Technology (BTH) in Karlskrona, Sweden as well as professor of Innovation Studies at CIRCLE, Lund University. He is also affiliated to the Research Institute of Industrial Economics and the Swedish Entrepreneurship Forum in Stockholm. He has a PhD in Economics from Jönköping International Business School (JIBS).

Trudy-Ann Stone

Trudy-Ann STONE is a Lecturer in the Department of Urban Studies at Malmö University in Malmö Sweden. She has a PhD in Industrial Economics and Management from Blekinge Institute of Technology.