Publication
The Korean Economic Review
What Determines In-house Service Activities within Manufacturing Firms: Firm-level Evidence from Korea
Siwook Lee (KDI School of Public Policy and Management)Year 2023Vol. 39No. 2
Abstract
This study empirically investigates the key determinants of in-house service activities
within manufacturing firms based on an establishment-level panel dataset from 2006 to
2019. The extent of in-house service activities is measured as the proportion of workers
performing knowledge-intensive core service functions, such as R&D, design, IT,
administration, and management. After controlling for unobserved heterogeneity and
simultaneity by adopting the system generalized method of moments, our regression results
reveal that companies with higher export intensities, wider networks of overseas subsidiaries,
or those located in metropolitan areas engage in more in-house service activities than their
counterpart, and that no statistically significant link exists between external outsourcing and
in-house service activities. Overall, our results suggest that export activities and overseas FDI
networks are key determinants of the extent of in-house service provisions within Korean
manufacturing firms.