The Role of Institutions and Immigrant Networks in Firms’ Offshoring Decisions

Simone Moriconi, Giovanni Peri, Dario Pozzoli

Publikation: Working paperForskning

Resumé

The offshoring of production by multinational firms has expanded dramatically in recent decades, increasing these firms’ potential for economic growth and technological transfers across countries. What determines the location of offshore production? How do countries’ policies and characteristics affect the firm’s decision about where to offshore? Do firms choose specific countries because of their policies or because they know them better? In this paper, we use a very rich dataset on Danish firms to analyze how decisions to offshore production depend on the institutional characteristics of the country and firm-specific bilateral connections. We find that institutions that enhance investor protection and reduce corruption increase the probability that firms offshore there, while those that increase regulation in the labor market decrease such probability. We also show that a firm’s probability of offshoring increases with the share of its employees who are immigrants from that country of origin.
The offshoring of production by multinational firms has expanded dramatically in recent decades, increasing these firms’ potential for economic growth and technological transfers across countries. What determines the location of offshore production? How do countries’ policies and characteristics affect the firm’s decision about where to offshore? Do firms choose specific countries because of their policies or because they know them better? In this paper, we use a very rich dataset on Danish firms to analyze how decisions to offshore production depend on the institutional characteristics of the country and firm-specific bilateral connections. We find that institutions that enhance investor protection and reduce corruption increase the probability that firms offshore there, while those that increase regulation in the labor market decrease such probability. We also show that a firm’s probability of offshoring increases with the share of its employees who are immigrants from that country of origin.
SprogEngelsk
Udgivelses stedBonn
UdgiverIZA
Antal sider48
StatusUdgivet - okt. 2018
NavnIZA Discussion Paper
Nummer11888

Emneord

  • Offshoring
  • Product market
  • Labor regulations
  • Networks
  • Fixed start-up costs

Citer dette

Moriconi, S., Peri, G., & Pozzoli, D. (2018). The Role of Institutions and Immigrant Networks in Firms’ Offshoring Decisions. Bonn: IZA. IZA Discussion Paper, Nr. 11888
Moriconi, Simone ; Peri, Giovanni ; Pozzoli, Dario . / The Role of Institutions and Immigrant Networks in Firms’ Offshoring Decisions. Bonn : IZA, 2018. (IZA Discussion Paper; Nr. 11888).
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The Role of Institutions and Immigrant Networks in Firms’ Offshoring Decisions. / Moriconi, Simone; Peri, Giovanni; Pozzoli, Dario .

Bonn : IZA, 2018.

Publikation: Working paperForskning

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