The Impacts of International Outsourcing on Profits and R&D: A Revised Matching Model with Firm-to-Firm Spillovers
Abstract
This paper explores how international outsourcing affects profits and R&D by developing a modified matching model that incorporates firm-to-firm spillovers.
International outsourcing is a strategy that involves contracting with external suppliers in other countries to perform specific business functions or produce goods and services. This practice has become increasingly common in recent decades, as companies seek to reduce costs, improve efficiency, and access global markets.
Modified Matching Model
To better understand the effects of international outsourcing, the authors propose a modified matching model that includes firm-to-firm spillovers.
In traditional matching models, firms are assumed to be independent entities. However, in reality, firms can learn from and collaborate with each other, which can lead to spillovers of knowledge and technology. The modified model takes these spillovers into account, allowing for a more comprehensive analysis of the effects of international outsourcing.
Empirical Findings
The authors use data from Ghana to empirically test their modified matching model.
They find that international outsourcing has a positive effect on profits and R&D. This suggests that firms that outsource certain activities can benefit from cost savings and access to new knowledge and technologies, which can lead to increased innovation and profitability.
Implications for Policy and Management
The findings of this paper have implications for policymakers and managers.
Policymakers should consider the potential benefits of international outsourcing and create policies that support and encourage this practice. Managers should carefully evaluate the costs and benefits of outsourcing and consider the potential for firm-to-firm spillovers when making decisions about outsourcing.
Conclusion
This paper provides new insights into the effects of international outsourcing on profits and R&D.
The modified matching model developed by the authors captures the important role of firm-to-firm spillovers and provides a more comprehensive understanding of the complex relationship between outsourcing and innovation. The findings of this paper can help policymakers and managers make informed decisions about outsourcing and its implications for economic growth and development.
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