Offshoring and company characteristics: some evidence from the analysis of Spanish firm data

Abstract

This article investigates firm characteristics associated with the probability of relocating activities in a foreign country. Using manufacturing firms micro data for the 1999-2005 period, we find evidence that cost-cutting objectives are the main determinants for offshoring production. The analysis reveals that firms that are larger and have higher productivity, more research and development activity and greater human capital intensity are more likely to relocate activity abroad. Thus, the best firms self-select to offshoring activities. We note the special prominence of foreign firms among those that engage in offshoring. Our results show that self-selection of the best firms are much more significant in foreign firms.