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Outsourcing impact on manufacturing firms’ value: Evidence from Japan

Authors
Journal
Journal of Operations Management
0272-6963
Publisher
Elsevier
Publication Date
Volume
25
Issue
4
Identifiers
DOI: 10.1016/j.jom.2006.12.002
Keywords
  • Purchasing
  • Financial/Economic Analysis
  • Empirical Research Methods

Abstract

Abstract Previous studies on the effects of outsourcing have relied largely on anecdotal evidence, non-financial metrics or accounting-based measures that ignore intangible value. This study views outsourcing effects from its future revenue-generation potential, using market value. The relation between firms’ market valuation and outsourcing decisions is investigated using a cross-sectional valuation approach. Results based on Japanese manufacturing industries data from 1994 to 2002 indicate that core business-related outsourcing, offshore outsourcing, and shorter-term outsourcing have positive effects on outsourcing firms’ market value. In contrast, non-core business-related outsourcing, domestic outsourcing, and longer-term outsourcing are not found to enhance firm value.

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