International Services Outsourcing and Innovation: An Empirical Investigation

We provide a comprehensive empirical analysis of the links between international services outsourcing, wages and innovation using plant level data covering the period 2000 to 2004. Somewhat consistent with the predictions of recent theory, we observe a positive relationship between international outsourcing of services and innovative activity, measured in terms of R&D, at the plant level. However, we only find evidence for such positive effects for plants in manufacturing, not in services sectors. Furthermore, this positive effect of international services outsourcing on innovation does not appear to be mediated through wages as proposed by theory.International services outsourcing, innovation, R&D

Does Outsourcing Increase Profitability?

We investigate the relationship between outsourcing and profitability paying particular attention to the endogeneity of outsourcing. The empirical analysis uses unique plant level data for the electronics sector in Ireland. A particular feature of the data is that it records detailed information for 12 electronics sub-sectors covering both manufacturing and services activities. We distinguish outsourcing of materials from outsourcing of services inputs. We find that plants that are substantially larger than the mean employment size benefit from outsourcing materials while this does not appear to be the case for small plants. Results for outsourcing of services are not as clear-cut, however.

Services Outsourcing and Innovation: An Empirical Investigation

We provide a comprehensive empirical analysis of the links between international services outsourcing, domestic outsourcing, profits and innovation using plant level data. We find a positive effect of international outsourcing of services on innovative activity at the plant level. Such a positive effect can also be observed for domestic outsourcing of services, but the magnitude is smaller. This makes intuitive sense, as international outsourcing allows more scope for exploiting international factor price differentials, therefore giving the establishment higher profits and more scope to restructure production activities towards innovation. We also find that international services outsourcing has a positive effect on profitability, as predicted by theory, while this is not true for domestic sourcing. The results are robust to various specifications and an instrumental variables analysis.innovation, services outsourcing, offshoring, R&D

Surviving the Crisis: Foreign Multinationals vs Domestic Firms in Ireland

Starting from the observation that all firms in Ireland (foreign and domestic in manufacturing and services industries) were hit by the crisis, the paper asks whether there is a difference in the behaviour of foreign and domestic firms. One hypothesis is that foreign multinationals are less linked into the Irish economy, so more likely to leave once the economy is hit by a negative shock. The paper discusses background hypotheses before giving empirical evidence from firstly aggregate data, and secondly firm-level observations. The analysis of the latter suggests that foreign firms are not more likely to leave during the crisis than Irish firms. Some policy conclusions are offered in the paper.firm survival, financial crisis, Ireland

R&D and exporting: A comparison of British and Irish firms

This paper investigates the two way relationship between R&D and export activity. In particular, we concern ourselves with the question whether R&D stimulates exports and, perhaps more importantly, whether export activity leads to increasing innovative activity in terms of R&D (learning by exporting). We use two unique firm level databases for Great Britain and the Republic of Ireland and compare the results for these two countries. We find that previous exporting experience enhances the innovative capability of Irish firms. Conversely, no strong learning-by-exporting effects are found for British firms. Arguably the differences between Ireland and Britain are attributable to different, cross-country exporting patterns where Irish firms have a greater interface with OECD markets.learning effects, exporting, innovation, R&D

The Impact of Foreign Direct Investment On New Firm Survival in the UK: Evidence For Static v. Dynamic Industries

The paper examines the impact of Foreign Direct Investment (FDI) on the survival of business start-ups. FDI has potential for both negative displacement/competition effects as well as positive knowledge spillover and linkage effects on new ventures. We find a net positive effect for the whole dataset. However, a major contribution of the paper is to outline and test an argument that this effect is likely to be comprised of a net negative effect in dynamic industries (high churn: firm entry plus exit relative to the stock of firms) alongside a net positive effect in static (low churn) industries. We find evidence to support this view. The results identify new effects of globalisation on enterprise development with associated challenges for industrial policy.new firms, foreign direct investment, dynamic industries

How Do Banks Pick Safer Ventures? A Theory Relating the Importance of Risk Aversion and Collateral to Interest Margins and Credit Rationing

The paper augments the asymmetric information literature on bank lending to new ventures by focusing on the more neglected area of moral hazard; specifically the relationship between risk aversion, an entrepreneur?s wealth and the provision of collateral. The results highlight some interesting nuances which are not characteristic of the properties of models that have dominated the literature and which mainly focus on the problems of adverse selection. Contrary to models such as Evans and Jovanovic (1989) Blanchflower and Oswald (1998) our model shows that credit rationing does not necessarily have to be negatively related to an entrepreneur?s initial wealth. Our model shows that banks can use collateral as a means of affecting an entrepreneur?s risk aversion – the tactic being least effective for both very low and high wealth individuals. We show that this can cause banks to ration credit at both tails of the wealth distribution. Furthermore, we argue that credit rationing is likely to be less applicable to low wealth individuals, as a small increase in their initial wealth can have very dramatic effects on access to bank finance as it both increases the risk aversion of the borrower as well as the usual affect of raising the amount of the debt that is effectively securitized through borrower collateral. Thus, through this mechanism, low wealth individuals who can provide at least some collateral would have greater access to finance than previously supposed. The results also indicate why collateral to debt ratio need not be negatively related to interest rate margins

A comparative analysis of bank lending to small enterprises in Ireland and Germany

The issue of whether the Irish banking system compares favourably or more adversely with other banking systems in the provision of finance to small businesses and in particular enterprises with a riskier profile such as those with higher volumes of current or intellectual assets to fixed assets has been addressed by several authors to date. Foley and Griffith, 1993. Kinsella ,1992 (Culliton Report). Deloitte and Touche, 1994. Bannock and Albach, 1991 (Germany). Burns and Clements, 1992 (UK). Bank specific studies such as the above are complemented by studies which examine the performance of entrepreneurs and where the issue of banking comprises an ancillary issue rather than main focal point. Carpenter, 1993. Kinsella, Clarke, Storey, Mulveanny and Coyne, 1994. Cosh and Hughes, 1994 (UK). SBRC, 1992 (UK). Hogan, 1995. Kenny, 1994. Aston Business School, 1991. (UK) This survey seeks to contribute to the literature by focusing on the banking aspects of small business financing in an international context, building on the bank specific studies as its central thrust while incorporating some findings of firm specific studies where relevant. Some practices of German banks were applied as a yardstick against which to assess the performance of Irish banks vis a vis lending to small businesses. This study endeavours to assess the validity of beliefs th a t German banks exercise influence on firms through relationship banking, proxy voting rights and membership on supervisory boards which supposedly permit the conferral of advantageous lending terms to business. Attempts will be made to establish if these widely held views about the superiority of the German banking system are valid in a small business context. Through a series of in-depth interviews with German and Irish bankers who deal with small businesses from across the banking spectrum, additional insights emerge on how- the German bankers perceive changes in the Irish system, the securing of loans, fallout rates in riskier small business groups and the orientation of lending