levels in activities that can be contracted to suppliers of intermediate inputs, depending on the quality of the contracting institutions in the country. 8. Bakos and Brynjolfsson (1993) developed a model that explains the decisions to outsource based on new opportunities brought about by information and communication technologies. ICT lowers coordination costs, which in turn facilitates outsourcing of tasks domestically or abroad (offshoring). Using data for US manufacturing firms, Fort (2017) finds that the adoption of ICT technologies between 2002 and 2007 is associated with a 3.1 percentage point increase in its probability of outsourcing. This effect is 20 percent higher in industries with production specifications that are easier to codify in an electronic format.
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