Outsourcing and firm performance nexus: An analysis using the conventional and panel double-bootstrap procedure

Industrial performance is an essential element of economic progress. In this study, we examine the impact of outsourcing on industrial performance using the firm-level data of 191 textile companies in India over the period 2000–2015. First, we follow the conventional non-parametric two-stage procedure and analyse the nexus between outsourcing and firm performance under a single-objective setting. We then test the influence of outsourcing on the performance of multiple-objective firms using reverse directional distance function scores. To address the bias in efficiency estimation and the serial correlation issue in the second-stage regression, we use truncated regression and the double-bootstrap procedure for panel data analysis. Our results show an improvement in industrial performance over the study period. Our analysis following the conventional two-stage procedure shows that the outsourcing of manufacturing activities and professional jobs contributes to industrial performance. The relation between outsourcing and firm performance essentially remains the same in a more reliable analysis using a panel double bootstrap procedure.