Offshoring and Business Organization: Evidence from Canadian Manufacturing Firms

Abstract

In the globalized economy, it has become essential for firms to re-organize their production to grow and to be competitive in both domestic and international markets. Over the past decade, offshoring has emerged as an important and valuable business re-organization avenue, especially in the manufacturing sector. Using newly linked Canadian manufacturing micro data for 2002–2006, which for the first time provides a direct measure of offshoring over a period in Canada at the firm level, this paper examines and estimates the linkage between offshoring and business organization. It shows that offshoring is part of firms' overall business strategy, closely linked to other outward-oriented business activities such as exporting and being foreign-controlled. In addition, it is found that offshoring is associated with business organization in terms of firm variation in intermediate input variety and in output concentration.