Discussion Paper
No. 2016-37 | July 26, 2016
David de Matías Batalla
The New Paradigm of International Production. Empirical Evidence of Spanish Offshoring Activities
(Published in Recent Developments in Applied Economics)

Abstract

In this paper, the author presents the impact of new players and factors in international business activities, which have a direct influence on international economic structure. One of the most important determinants over the last decades has been foreign direct investment, which has encouraged the dislocation of business activities in many industries. This, together with the rest of foreign direct investment, makes the author think of extending the OLI model to OLIM, where M is the mode of entry. One type of this mode is offshoring which makes easier the relocation of business activity from developed economies to developing economies. The study of offshoring activities is the focus of this paper, with the data coming from a survey of 166 Spanish multinational firms. Empirical evidence should provide us the main factors that motivate Spanish multinational firms to be engaged in foreign direct investment via offshoring.

JEL Classification:

D23, F21, F23

Cite As

David de Matías Batalla (2016). The New Paradigm of International Production. Empirical Evidence of Spanish Offshoring Activities. Economics Discussion Papers, No 2016-37, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2016-37


Comments and Questions



Anonymous - Referee Report 1
July 26, 2016 - 12:18
The paper contributes to the literature of the determinants of international business activity through an empirical analysis with a new database. The paper focuses on the offshoring decisions of a sample of Spanish firms. Although the contribution to the existing literature it is not particularly significant, it provides some new findings on offshoring decisions. Nevertheless, the paper has some limitations regarding their contribution:First, the contribution and the novelty of the paper are not clearly stated in the introduction section. In addition, the objectives of the paper are not explained and the importance of the topic is not justified.Second, the relation between Section II and III and the objective of the paper that focuses on the offshoring decision, is not clearly explained. These two sections seem quite long and not strictly oriented towards providing the necessary framework to support the hypotheses. Third, the contribution of the paper would probably gain in clarity placing Section V, where offshoring is explained, before presenting the hypotheses (Section IV).Fourth, the selection of the hypotheses is not justified enough. Why these in particular and where is the novelty? The empirical analysis is carried out using a new database based on a survey sent by the author to Spanish firms with FDI. For the estimations a logit model is used. Although the results provide some new information on offshoring decisions, the empirical analysis has some shortcomings: First, the dependent variable is not clearly presented. Including the question used in the survey would help to clarify it.Second, the selection and the reasons for introducing the control variables are not clearly stated. In addition, other potential control variables could have been considered (e.g., age, foreign capital participation, a proxy of human capital).Third, some of the independent variables, particularly the first one (non-specific assets), are not clearly explained.Fourth, the presentation of the results could be improved comparing them with the existing empirical analyses, providing a more detailed explanation and highlighting the novelties. In addition, some statements regarding H1 and H4 are not precise. The parameters of the estimations regarding these hypotheses (“positive relation with offshoring”) are not significant and therefore they should be rejected. Finally, the limitations of the empirical analysis are not discussed. Some of these limitations (for instance, endogeneity concerns because of reverse causality in some of the independent variables) make it very difficult to obtain causal effects.

David de Matías Batalla - Reply 1
July 27, 2016 - 10:58
Dear. First the all thanks for your comments, I really appreciate it. I´m a beginner research and young and all critics support to me to improve it. On the one hand, theoretical part in my opinion can be quite longer except offshoring literature review. First chapters are an introduction to offshoring as a foreign direct investments. In my thesis I expand and improve eclectic paradigm I wanted explain in this paper (this is the most important, I give to academic world the best international paradigm ever). However I forgot add in the second point the endowment paradigm of international production(too much work between thesis, conferences, papers, my company). After this point I explain from OLI to OLIM and then offshoring the order is clear and justified in my opinion. Although I agree with you I could be more focus on offshoring, specially explain more framework and the election of variables. On the other hand, the election of variables are theses based on my own survey approved by my directors. Some variables you recommend me as dummies I have them as independent in my thesis in order to explain fdi. Dummies I have are which I show in the paper. Statistical results are consistent, there are no problems and no correlation between variables for example. I have no space to add all tables with this information. I came from management approach and these information is not reflected in the paper, quite different from economic approach. However thanks for your nice opinion. I will take your comments to improve my papers in the future and take attention in my thesis defense in some points. Best Regards

Anonymous - Invited Reader Comment
July 27, 2016 - 11:41
Dear David, I hope you find my comments useful. Best
[ Download attached file ]

Anonymous - Referee Report 2
August 01, 2016 - 09:25
see attached file
[ Download attached file ]

David de Matías Batalla - reply 2
August 09, 2016 - 11:07
Dear. Thanks to your comments, are useful too. They will be in account in next offshoring paper