Review of Industrial Organization

, Volume 50, Issue 1, pp 69–90 | Cite as

New Outsourcing, Demand Uncertainty and Labor Usage

  • Sasan Bakhtiari
  • Robert Breunig


We examine the decisions by small and medium-sized Australian firms to undertake new outsourcing. We hypothesize that new outsourcing may be related to demand uncertainty. We test this hypothesis at the firm level, making use of unique longitudinal data on Australian manufacturing. We find an asymmetric relationship between new outsourcing and demand uncertainty. For the larger firms in our sample, positive demand shocks are related to more new outsourcing. For all firms, negative demand shocks are related to less new outsourcing. New outsourcing appears to be related to demand uncertainty and to the firm’s overall approach to labor utilization.


Business strategy Demand uncertainty Labor adjustment Outsourcing 

JEL Classification

D22 L21 L24 L6 



We thank Paul Jensen for his suggestions. We thank the editor Lawrence J. White and two anonymous referees for their very helpful comments.

Supplementary material


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Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  1. 1.Australian Department of Industry, Innovation and ScienceCanberraAustralia
  2. 2.Crawford School of Public PolicyAustralian National UniversityCanberraAustralia

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