Trust your neighbour. Industrial relatedness, social capital and outsourcing

Roberto Antonietti, Maria Ferrante and Riccardo Leoncini

No 1403, Papers in Evolutionary Economic Geography (PEEG) from Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography

Abstract: Relying on a unique dataset of small, machine-tool firms located in Emilia Romagna, Italy, we estimate the separate effects of industrial relatedness and social capital on the propensity to fully or partially outsource production activities. We focus on a series of 29 production phases, for which we have information on whether they are accomplished in-house or outside the firm. After controlling for endogeneity, we find that: (i) full outsourcing is positively related to social capital, but this effect vanishes as industrial proximity with neighbouring firms increases; and (ii) firms engage in concurrent sourcing only when industrial relatedness with neighbouring firms is high. Also phase estimates show that: (iii) while social capital matters for full outsourcing of core activities, for full outsourcing of peripheral activities it is industrial relatedness that is relevant; and (iv) there is no significant effect of either industrial relatedness or social capital on the concurrent sourcing of core and peripheral activities.

Keywords: concurrent sourcing; full outsourcing; industrial relatedness; social capital; machine-tool industry (search for similar items in EconPapers)
JEL-codes: A13 D23 L23 L24 L64 R12 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2014-01, Revised 2014-01
New Economics Papers: this item is included in nep-geo and nep-soc
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Persistent link: https://EconPapers.repec.org/RePEc:egu:wpaper:1403

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