We study the implications of vertical integration on innovation performance using firm-level data on Australian manufacturing. We use the data to distinguish between low-cost-oriented and innovation-oriented outsourcing. Outsourcing without innovation lowers costs at the expense of damaging the...

It has been theorized that businesses are more likely to outsource when demand uncertainty is large in order to gain flexibility in production. We provide the first firm-level test of this hypothesis, making use of unique longitudinal data on Australian manufacturing. We find that new...