The impact of offshoring on firm's exports

Abstract

Offshoring is a strategy that has been widely used as a mean to reduce costs, increase firms' productivity and flexibility. Consequently, it is aimed to improve the competitive situation of the firm in its markets. But beyond this effect, we depart from international business literature, the resource-based view and transaction cost economics to argue that offshore helps firms to export, not only because it increases its productivity and flexibility but because it provides some knowledge and expertise to develop themselves in international markets. This knowledge they incorporate becomes valuable in their search for clients increasing the likelihood of being an exporter for those firms that offshore. Obviously, the importance of offshoring as a source of knowledge for international activities will be more important for small firms than for larger firms. We present an empirical study over Spanish manufacturers that confirms that firms that offshore export more, and that this extra effect is larger in small firms than in large ones.

Keywords

• offshoring
• exports
• inward–outward connections
• multinational enterprises