Journal
ECONOMICS OF INNOVATION AND NEW TECHNOLOGY
Volume 15, Issue 7, Pages 617-647Publisher
ROUTLEDGE JOURNALS, TAYLOR & FRANCIS LTD
DOI: 10.1080/10438590600665120
Keywords
Outsourcing; Technological diffusion; Firm-specific human capital; Market-mediated employment arrangements
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Funding
- Australian Research Council Small Grant program
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What drives the observed rapid growth of outsourcing in US manufacturing? This article approaches this question by asking whether technological diffusion driven by R&D spillovers is in part responsible for the growth of atypical work arrangements in the USA. Relying on data of technological diffusion since the early 1970s, this study provides some evidence that technological factors may have contributed to the spread of outsourcing. When sample composition effects are accounted for, technological innovation reduces outsourcing in high-tech industries. Furthermore, this study highlights the importance of distinguishing between 'rent' and 'pure knowledge' spillovers. Rent spillovers are positively correlated with outsourcing, whereas pure knowledge spillovers usually decrease the incentive to outsource. Support to the technological diffusion hypothesis is also found, particularly in a sample of high-tech industries after 1980, in which rapid diffusion of IT technologies is notoriously witnessed. Alternative hypotheses are better applied to low-tech industries.
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