During the last decades, enterprises in industrialised countries have increasingly outsourced parts of their value chain to external suppliers. This development is particularly pronounced in the field of IT services.

In Germany, for example, about nine out of ten firms with five or more employees resort to externally provided IT services. This development has offset vivid political and economic debate not least since a considerable share of intermediate goods are produced abroad. Critics fear that due to the wage differentials in particular between West European countries on the one hand and East European and Asian ones on the other outsourcing fosters unemployment in countries like Germany if an increasing share of value added is created abroad. Advocates of outsourcing, however, point out that technology-intensive intermediates are often better and cheaper if produced by specialised firms or by firms located in countries with lower wage costs. They argue that West European firms must strengthen their competitiveness in international markets by outsourcing.

The main purpose of this project was to analyse to what extent firms with IT outsourcing deviate from firms without IT outsourcing with respect to job creation and competitiveness. Moreover, we analysed the motives and the determinants of the outsourcing decision. In order to explain potential differences in employment between outsourcing and non-outsourcing firms, we also considered various indicators of competitiveness of firms, such as innovation and productivity measures. The empirical analysis entailed statistical and econometric analyses based on representative data sources for Germany as well as semi-structured interviews with persons in charge in firms supplying and procuring IT services.