Does IT-Outsourcing Increase Firm Success? A Firm-level Investigation for Germany

Using German firm-level data, an endogenous switching regression model is employed for labor productivity and firms ’ decision to source out ba-sic IT-services. This approach takes possible complementarities between IT-outsourcing and production input factors into account and allows IT-outsourcing to affect any factor of the production function. Estimation results show that IT-outsourcing firms produce more efficiently than non-IT-outsourcing firms. Furthermore, they have a significantly larger output elasticity of ICT-capital. ICT-capital and IT-outsourcing can for that rea-son be interpreted as complementary factors positively affecting firms ’ labor productivity. An additional analysis indicates that IT-outsourcing, in the medium term, has no negative effect on firms ’ growth rate