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The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Jürges, Hendrik / Ludwig, Sandra

Ed. by Auriol, Emmanuelle / Brunner, Johann / Fleck, Robert / Mastrobuoni, Giovanni / Mendola, Mariapia / Requate, Till / de Vries, Frans / Zulehner, Christine

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Volume 15, Issue 4


Volume 6 (2006)

Volume 4 (2004)

Volume 2 (2002)

Volume 1 (2001)

The Dynamics of Offshoring and Institutions

Fredrik Heyman / Patrik Gustavsson Tingvall
Published Online: 2015-06-02 | DOI: https://doi.org/10.1515/bejeap-2014-0073


Previous research has found that weak institutions can hamper investment and alter patterns of trade. However, little is known about the impact of institutional quality on offshoring. This lack of knowledge is surprising, given that offshoring has become an important part of many firms’ internationalization strategies. This study uses detailed firm-level data for the 1997–2005 period to examine the relationship between institutional quality in 113 source countries and offshoring by Swedish firms. The results suggest that weak institutions are negatively related to offshoring in general and to the offshoring of R&D- and relationship specificity-intensive inputs in particular. An analysis of learning effects suggests that the impact of weak institutions on the offshoring of relationship specificity-intensive inputs vanishes when firms return to countries from which they have previous market experience. Our results are robust to the use of various measures of institutional quality.

Keywords: offshoring; institutions; firm-level data

JEL: F14; F23; P48


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About the article

Published Online: 2015-06-02

Published in Print: 2015-10-01

Funding: Fredrik Heyman gratefully acknowledges the financial support from the Swedish Research Council and the Swedish Research Council for Health and Working Life and Welfare (Forte). Both authors also gratefully acknowledge the financial support from the Torsten Söderbergs Research Foundation.

Citation Information: The B.E. Journal of Economic Analysis & Policy, Volume 15, Issue 4, Pages 1975–2016, ISSN (Online) 1935-1682, ISSN (Print) 2194-6108, DOI: https://doi.org/10.1515/bejeap-2014-0073.

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