Returns to Information Technology Outsourcing

This paper extends existing IT productivity research by evaluating the contributions of spending in IT outsourcing using a production function framework and an economy-wide panel data set from sixty industries in the United States over the 1998 to 2006 period. Their results demonstrate that IT outsourcing has made a positive and economically meaningful contribution to industry output and labor productivity. It has not only helped industries produce more output, but it has also made their labor more productive. Moreover, their analysis of split data samples reveals systematic differences between high- and low-IT intensity industries in terms of the degree and impact of IT outsourcing.