We provide a comprehensive empirical analysis of the links between international services outsourcing, domestic … outsourcing, profits and innovation using plant level data. We find a positive effect of international outsourcing of services on … innovative activity at the plant level. Such a positive effect can also be observed for domestic outsourcing of services, but the …

. Such outsourcing leads to increased wages for the remaining inhouse production. We find that stronger unions, which imply … higher domestic wages, reduce incentives for international outsourcing. Though somewhat surprising, this result provides a … theoretical reconciliation of the empirically observed trends of deunionization and increased international outsourcing in many …