The value of international outsourcing: an empirical study of Veneto clothing industry

Abstract

This paper investigates production outsourcing of the Veneto footwear and clothing industries. It is based on a survey delivered to a group of final producers that in the 90s began to manage production on a global scale. Direct investment, subcontracting and partnership that materialize in product manufacturing abroad are considered. The positive impact of the delocalization decision on firm’s value added and gross earnings is estimated by combining direct observation with the data from the balance sheets and employment stock at the firm’s level. The study shows the importance of production management along the global value chain in order to give new competitivity to the Veneto traditional sector. In the 80s Veneto clothing and footwear firms faced the increased competition in the international markets by outsourcing to domestic subcontractors and in the 90s transferred much of the previous outsourcing abroad, in countries with low labour costs, mainly in Eastern Europe and East Asia. This decision has been accompanied by a significant increase both in value added per capita and gross profit