Impact of Offshoring and Outsourcing on Performance of Clinical Trials

This paper examines the impact of offshoring and outsourcing of core activities on the project level performance of these activities. Specifically, we look at whether offshoring and outsourcing of core activities have a positive impact on performance which is measured as the duration and cost of the study. The research setting for this study is the pharmaceutical industry and we focus on clinical trials which is an important part of the R&D process. Our empirical data come from the CROCAS dataset compiled by FastTrack Systems. The study focuses on the period 1997-2005 and analyzes data on 14,305 clinical trials from 98 firms in the pharmaceutical industry. Controlling for project and firm level characteristics, our results show that outsourcing has a positive impact on performance while offshoring has a negative impact. We also find that domestic outsourcing improves project performance but offshore outsourcing decreases performance. Clinical trials done by foreign affiliates are more costly and take longer time to complete. Trials conducted by foreign affiliates in developing countries take shorter time to complete.