Outsourcing and offshoring of business services: how important is ICT?

This paper considers the impact that information and communicationtechnology (ICT) has on firms' choices over organisational form. In particular, the decision over whether to produce in-house or outsource services,and the decision over the location of activity. ICT reduces the transactionand adjustment costs of moving activity outside the firm, and of carrying itout at greater geographic distance. We find that more ICT-intensive firmspurchase a greater amount of services on the market and they are morelikely to purchase offshore than less ICT-intensive firms. This paper considers the impact that information and communicationtechnology (ICT) has on firms' choices over organisational form. In particular, the decision over whether to produce in-house or outsource services,and the decision over the location of activity. ICT reduces the transactionand adjustment costs of moving activity outside the firm, and of carrying itout at greater geographic distance. We find that more ICT-intensive firmspurchase a greater amount of services on the market and they are morelikely to purchase offshore than less ICT-intensive firms.