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European business statistics compilers often face a dilemma: On the one hand, user and policy requirements demand additional information on the structure and development of European enterprises. On the other hand, budget constraints and the reluctance to increase the burden on survey respondents and national statistical institutes put tight restraints on the enlargement of data requirements.
Microdata linking can provide an opportunity to discover new information and to develop new statistics and indicators both when using existing data sets but also when combined with new data collections. In the European Statistical System (ESS) one of the initiatives to investigate into this opportunity for business statistics was a project concentrating on linking the international sourcing survey with Structural Business Statistics (SBS) and International Trade in Goods Statistics (ITGS) in 2010. This was succeeded by a follow-up exercise launched in late 2012 which broadened the scope of the 2010 exercise to include foreign affiliates statistics (FATS).
This article describes the 2012 project that linked the results of the survey on “international organisation and the sourcing of business functions ” (hereafter the international sourcing survey) to ITGS and FATS on enterprise level, using unique enterprise identification numbers. This proved an innovative approach to create new statistics without increasing burden on enterprises. The article also explains some of the methodological issues of micro data linking. Finally the way forward for micro data linking is shortly addressed.
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Main statistical findings
- Foreign-controlled enterprises are much more active in international sourcing and international trade than domestically controlled enterprises.
- In all countries a majority of enterprises sourced internationally to only one region.
- In most countries this pattern is more diversified for international trade, where a majority of enterprises trade internationally with either three to five or even six or more regions.
- In most countries export intensity grew less or fell more between 2008 and 2011 in enterprises sourcing internationally when compared with enterprises who did not.
- In most countries employment grew less or fell more between 2008 and 2011 in enterprises sourcing internationally than in enterprises who did not.
Foreign controlled enterprises are more active in international sourcing and trade
Data from the international sourcing survey was linked with the inward foreign affiliate statistics to analyse the potential relationship between the enterprise being domestically or foreign-controlled and the prevalence of international sourcing. Significantly more foreign-controlled enterprises than domestically controlled enterprises source internationally (see figure 1). The international sourcing survey showed that international sourcing was most prevalent in the Nordic countries (Denmark, Finland, Sweden and Norway)[1]. Linking confirmed that this was the case for both domestically and foreign-controlled enterprises. The data was further linked to international trade in goods statistics (see figure 2). Although figure 2 shows the same pattern for the sub-population of traders as in figure 1 for the complete population, the prevalence of sourcing for the traders are somewhat higher.
Exporting more geographically diversified than international sourcing
The international sourcing survey collected data on enterprises engaged in international sourcing broken by region. Analysis of the microdata from the international sourcing survey shows that in all countries the majority of manufacturing enterprises sourced to only one region (see figure 3). The percentage varied from 51% for Finland to 83% for Sweden. By linking data from the international sourcing survey to international trade in goods statistics, it was possible to analyse the regional patterns for all enterprises employing 100 or more people that trade internationally (see figure 4). This was done only for enterprises in manufacturing because these dominate the international trade in goods. The analysis showed that patterns in export markets are more diversified than in sourcing. Typically enterprises traded with three to five regions. This diversification was even more pronounced in the EU15 were quite often the number of regions with which trade took place was even higher than five. In contrast in member states that joined the EU in 2004 and 2007 the number of enterprises trading in one or two regions was quite substantial.
Foreign controlled enterprises often trade with enterprises in the controlling country
Foreign-controlled enterprises tend to export goods to the ‘country of control’. In 2008, between 49 % (Lithuania) and 80 % (Slovakia) of all foreign-controlled manufacturing enterprises exported goods to the country of control (see figure 5). Imports of goods from the country of control are even more common, with between 72 % (France) and 92 % (Lithuania) of foreign-controlled enterprises importing goods from the country of control (see figure 6). These findings are consistent with the findings in the article "International sourcing of business functions", showing that 70 % to 80 % of sourcing enterprises are carrying out so-called international insourcing, i.e. moving business functions to a foreign affiliate or daughter company within the same multinational enterprise group.
Export intensity growth rates higher for enterprises not sourcing internationally
Linking the enterprises from the international sourcing survey to the trade statistics provided the value of exports. A further link to structural business statistics provided also the total turnover. This allowed export intensity (exports in goods as a proportion of total turnover) to be calculated for groups of enterprises defined by their sourcing status (see figure 7).
In all countries except Ireland, France and Sweden, enterprises not sourcing internationally saw their export intensity grow more or fall less between 2008 and 2011 than enterprises sourcing their core function internationally. Furthermore, in six countries, enterprises sourcing core functions internationally saw their export intensity grow more or fall less than enterprises sourcing support functions internationally. The opposite was true in Finland and Norway while in Slovakia and Bulgaria no difference was found.
Enterprises sourcing internationally lose more employment than enterprises not sourcing internationally
One of the main concerns about international sourcing is the effect it has on employment in the ‘home country’ of the enterprises concerned. To analyse this issue, data from the international sourcing survey was linked to data from structural business statistics. International sourcing is expected to be detrimental to employment in the country in question. This is because by definition enterprises move functions abroad which were previously carried out in the home country. It is impossible to determine, however, how employment would have developed had certain enterprises not sourced internationally.
Between 2008 and 2011, enterprises not engaging in international sourcing generally showed a larger increase or a smaller decrease in the employment they were providing in their home country, measured in full-time equivalents, compared to enterprises that sourced core functions internationally. This was the case in all countries except Finland and Lithuania (see figure 8). In most countries, enterprises sourcing support functions internationally also showed a larger increase or a smaller decrease in the employment they were providing in the country in question than those sourcing core functions internationally. Comparing enterprises not engaging in international sourcing and those sourcing only support functions internationally gives a more mixed picture. In five countries employment developed more positively among enterprises not sourcing internationally while in the remaining five the opposite was true. This data was also linked to foreign affiliate statistics to analyse possible differences between foreign and domestically controlled enterprises. The results of this can be seen in figures 9 and 10.
The microdata linking approach
New statistics on enterprises have traditionally been produced by carrying out surveys. This article presents an innovative approach to obtaining new information on the economic performance of enterprises – specifically, by linking different existing statistical sources at individual enterprise level. This approach does not require new surveys to be carried out and thus does not increase the burden placed on enterprises.
When attempting to link two or more sets of data, two things are vital for a successful exercise:
- There has to be a large enough intersection of responding units. In the case of the IS – SBS exercise, this was achieved, because the IS sample was selected as a subset of the SBS population, which means that in theory there should have been a matching SBS data set for every IS data set.
- There has to be a unique identifier or at least a very reliable matching approach. Since both the IS and the SBS use national business registers (NBR) as a frame, this was the case for the IS-SBS linking. However, ITGS is not directly based on NBRs, so VAT numbers were used to link ITGS data sets to the NBR and thereby to IS/SBS.
To be able to benchmark the stratum of enterprises engaging in international sourcing, it was important to designate a control group. A simple approach would have been to use all the enterprises in the linked dataset not engaging in international sourcing, however, this may have led to a skewed result, as the structure of the control group in regard to other variables like enterprise size or turnover may have been very different from the structure of the group of sourcing enterprises. The approach taken in the project was therefore to construct a control group of non-sourcing enterprises from the survey population with the same characteristics as the sourcing one in terms of economic activity.
Eurostat set up the microdata linking project and the national statistical offices in nine Member States (Bulgaria, Denmark (which acted as coordinator for the project), Finland, France, Ireland, Lithuania, the Netherlands, Sweden and Slovakia) and Norway carried it out in 2013. The two main objectives of the project were to • test the centrally developed methodology for linking datasets and producing standardised outputs across a number of participating countries and to • produce new information on enterprises that responded to the 2009–11 international sourcing survey, carried out in 15 countries including all those taking part in the microdata linking project.
Organisation of the project
The core dataset used in the project was the data from the 2009–11 international sourcing survey. This data was linked at individual enterprise level to structural business statistics, international trade in goods statistics and inward foreign affiliate statistics and to additional information from national business registers. Business registers play a pivotal role in linking datasets. In most countries, the business register is the central register containing enterprise identification numbers and information on multinational groups. It is where samples for surveys are compiled and the main breakdowns (such as economic activity) kept up to date. The project was split into three phases. The first phase involved the construction of the linked microdata files. The project coordinators produced standardised guidelines explaining in detail how the linked datasets in each country were to be structured and provided code to ensure that identical tables were made in all countries. Each country recorded information from all the data sources mentioned above in one database. The microdata files were stored locally at national statistical offices throughout the project and were not shared with third parties.
In the second phase of the project, the linked files were tested for consistency. Although each dataset being used in the project had already been rigorously edited, it was necessary to carry out further checks to ensure, for example, that enterprises were represented by the same statistical units across different datasets and over time, as the reporting units used for specific enterprises could have differed across the data sources mentioned above. The tests used during this phase of the project were devised by the project coordinators and implemented locally by the national statistical offices.
In the third phase of the project standardised statistical output was created in each country, consisting of a descriptive analysis, longitudinal analysis and regression analysis.
The project showed that:
- microdata linking has significant potential as a way of gathering new statistical evidence without increasing the burden placed on respondents;
- a coordinated approach to microdata linking is a cost-effective way for national statistical offices to undertake microdata linking and ensures harmonised, comparable results across countries;
- microdata linking gives new insights into the behaviour of enterprises engaging in international sourcing and the impact of international sourcing on European economies;
- by linking various data sources, it is possible to conduct regression analysis (not shown in this article), and by extension, other types of statistical analysis such as multivariate analysis and cluster analysis.
Other microdata linking projects in Eurostat
This project is only one of a number being carried out by Eurostat and the European Statistical System (ESS) in the area of microdata linking. Others include:
- [ESS_Data warehouse] an ESSnet on microdata linking and data warehousing in statistical production. This projects aims to support the development of more integrated databases and data production systems for business statistics in Member States in the European Statistical System;
- [ESS_Limit] which was developed to increase the amount of information available on enterprises’ use of ICT and its impact by linking different sets of enterprise data, including business registers, production surveys, e-commerce surveys, innovation surveys, education registers and trade statistics, for 15 European countries;
- [ESS_Lait] an ESSnet on linking microdata to analyse the impact of ICT. Its aims are to develop new approaches to assessing the impact of ICT on business and the economy, make recommendations on future measurement needs and develop new methods for producing indicators.
Next step in microdata linking
Microdata linking is considered to be an important strategic approach which will be of use in the production of business statistics in the future. Eurostat has therefore launched a project on microdata linking and has set specific linking exercises to be carried out in 2014 and 2015. Eight EU Member States (Austria, Germany, Denmark, Finland, Latvia, the Netherlands, Portugal and Sweden) and Norway are taking part in the project. Its general objective is to develop and implement microdata linking in order to increase the value of data already available, in particular structural business statistics.
This new project will benefit greatly from the work carried out for this article and from the other microdata linking projects mentioned above.
See also
- Global value chains
- Global value chains - international sourcing to China and India
- International sourcing of business functions - Statistics in focus 8/2013
- International sourcing statistics
Further Eurostat information
Publications
- Features of International Sourcing in Europe in 2001-2006 - Statistics in focus 73/2009
- International Sourcing in Europe - Statistics in focus 4/2009
- Plans for International Sourcing in Europe in 2007-2009 Statistics in focus 74/2009
Main tables
Dedicated section
Methodology / Metadata
- International sourcing statistics - all activities (ESMS metadata file - iss_esms)
- Structural business statistics (ESMS metadata file - sbs_esms)
Notes
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