Factors Affecting Outsourcing for Information Technology Services in Rural Hospitals: Theory and Evidence

As health information technology becomes more prevalent for most healthcare facilities, hospitals across the nation are choosing between performing this service in-house and outsourcing to a technology firm in the health industry. This paper examines factors affecting the information technology (IT) outsource decision for various hospitals. Using 2004 data from the American Hospital Association, logistic regression models find that governmental ownership and a proxy variable for hospitals that treat more severe injuries positively impact the probability of outsourcing for IT services.Health Information Technology, Outsourcing, Hospital, Health Economics and Policy, Labor and Human Capital, Research and Development/Tech Change/Emerging Technologies, I12, C140,

Outsourcing and Technological Innovations: A Firm-Level Analysis

This paper presents a dynamic model that analyzes how firms’ expectations with regards to technological change influence the demand for outsourcing. We show that outsourcing becomes more beneficial to the firm when technology is changing rapidly. As the pace of innovations in production technology increases, the firm has less time to amortize the sunk costs associated with purchasing the new technologies. This makes producing in-house with the latest technologies relatively more expensive than outsourcing. The model therefore provides an explanation for the recent increases in outsourcing that have taken place in an environment of increased expectations for technological change. We test the predictions of the model using a panel dataset on Spanish firms for the period 1990 through 2002. The empirical results support the main prediction of the model, namely, that all other things equal, the demand for outsourcing increases with the probability of technological change.technological change, outsourcing

The Influence of Outsourcing and Information and Communication Technology on Virtualization of the Company

In the article we investigate the field of virtual organizations, which in the definition of many authors consists of two components: outsourcing and information and communication technology. In the study we have tried to determine which of the two, in the opinion of employees working in the area of Slovene tourism, contributes to a greater degree to virtualization of the company. We determine that outsourcing influences the virtualization of the company more strongly than does information and communication technology, since it enables the company to acquire new knowledge and know-how and increase its competitiveness in the marketplace.virtual organization, outsourcing, information and communication technology

Strategic Outsourcing with Technology Transfer

We analyze the outsourcing decision of a firm for a key input of a final good production to an independent input supplier even though the firm has an option of producing that key input in-house at a lower cost with a better technology. We find that for smaller technology gap with the independent input supplier the firm would outsource and for larger technology gap it would produce the input in-house for itself and for its rivals. The outsourcing occurs in order to take advantage of its sale of superior technology to the independent input supplier at a high payment although it involves a high price for the input to be acquired from the monopoly input supplier. Though the firm gains from strategic outsourcing, consumers’ welfare as well as social welfare goes down.outsourcing; technology transfer; vertical structure; competition; welfare

IT outsourcing and employment growth at the firm level

Outsourcing is widely associated with accompanied job losses in the outsourcing firm, at least in the short run. However, the medium and long run effects of outsourcing on employment growth might still be positive. This paper particularly focuses on IT outsourcing and its medium-term effects on employment growth. Therefore, a three year time period from 2003 to 2006 is analysed using German firm-level data and instrumental variable estimation. I find evidence that IT outsourcing has a positive effect on firms' employment growth rate. However, dividing the sample into manufacturing and service firms, a medium-term positive growth effect of IT outsourcing can only be observed for firms operating in the service sector. --Information and Communication Technology,Outsourcing,Employment Growth

Productivity Measurement and the Impact of Trade and Technology on Wages: Estimates for the U.S., 1972-1990

We develop an empirical framework to assess the importance of trade and technical change on the wages of production and nonproduction workers. Trade is measured by the foreign outsourcing of intermediate inputs, while technical change is measured by the shift towards high-technology capital such as computers. In our benchmark specification, we find that both foreign outsourcing and expenditures on high-technology equipment can explain a substantial amount of the increase in the wages of nonproduction (high-skilled) relative to production (low-skilled) workers that occurred during the 1980s. Surprisingly, it is expenditures on high-technology capital other than computers that are most important. These results are very sensitive, however, to our benchmark assumption that industry prices are independent of productivity. When we allow for the endogeneity of industry prices, then expenditures on computers becomes the most important cause of the increased wage inequality, and have a 50% greater impact than does foreign outsourcing.

Preference Bias and Outsourcing to Market: A Steady-State Analysis

We analyze a model that focuses on the export/outsource decision. Outsourcing has the advantage of providing better information about local preferences. The disadvantage is that producing in the host country also means using the inferior technology embodied in the local capital. The decision of whether to offer an outsourcing contract weighs these two effects against each other. The host country accepts the outsourcing contract if the higher price they pay for the outsourced good is worth the benefit of consuming a manufactured good closer to their ideal variety. These results suggest that as low income countries develop they become a more attractive destination for outsourcing because the quality of their capital improves and the local market is more lucrative. In addition, the developing low income country finds the outsourcing contract more attractive since their increased demand for the correct variety of the manufactured good increases. This suggests that preference based outsourcing is more likely to occur with higher income host countries.outsourcing, multinational firms, foreign direct investment

Outsourcing Versus Foreign Direct Investment--A Welfare Analysis

Foreign direct investment may not necessarily be the most welfare enhancing form of international investment. The host country may avail options like – Joint venture, technology licensing, franchising, outsourcing etc. A host country’s choice of organizational form should depend on its growth and welfare effects. This paper compares the welfare effects of FDI with that of outsourcing in the host country using Grossman-Helpman quality ladders framework. If the host absorptive capacity is above a threshold level, outsourcing is more welfare enhancing vis-à-vis FDI; while even with lower than threshold absorptive capacity, outsourcing being welfare improving over FDI is not ruled out.outsourcing, foreign direct investment, absorptive capacity

The Determinants of Outsourcing from the U. S.: Evidence from Domestic Manufacturing Industries, 1972-2002

The issue of outsourcing as a form of foreign direct investment (FDI) has been widely discussed in the recent past. In this essay, I analyze what determines the outsourcing activity by looking at U. S. manufacturing industries between 1972 and 2002. I concentrate on correlation between the measure of outsourcing and wages, bargaining coverage contracts, transportation costs, and private gross fixed investment in information technology. My analysis finds differences in the effects of wages on outsourcing activity depending on the type of industry (i.e., whether the industry produces durable or non-durable goods). The main regression model finds that wages and union coverage cannot fully explain the colossal increase in outsourcing activity in the last three decades. Rather, the primary factors influencing the increase in outsourcing are likely to be the growth in foreign productivity and technological changes that allow more international specialization in the intermediate production stages of the final good.Outsourcing, Estimation

Intellectual Property Rights, Product Complexity, and the Organization of Multinational Firms

This paper studies how the Intellectual Property Right (IPR) regime in destination countries influences the way multinationals structure the international organization of their production. In particular, we explore how multinationals divide tasks of different complexities across countries with different levels of IPR protection. The analysis studies the decision of firms between procurement from related parties and outsourcing to independents suppliers at the product level. It also breaks down outsourcing into two types by distinguishing whether or not they involve technology sharing between the two parties. We combine data from a French firm-level survey on the mode choice for each transaction with a newly developed complexity measure at the product level. Our results confirm that firms are generally reluctant to source highly complex goods from outside firm boundaries. By studying the interaction between product complexity and the IPR protection, we obtain that (i) for technology-sharing-outsourcing IPRs promote outsourcing of more complex goods to a destination country by guaranteeing the protection of their technology, (ii) for non-technology-related-outsourcing IPRs attract the outsourcing of less complex products that are more prone to reverse engineering and simpler to decodify and imitate.