Tarja Hatakka, Statistikcentralen, Tarja.Hatakka@stat.fi

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The outsourcing of production is redefining the role of many business enterprises. An enterprise that had been a major manufacturer may now outsource all production to establishments based in other countries.

According to NACE codification rules the principal who owns the main material inputs and thereby owns the final outputs, but who has done the production by contractors, is classified in NACE section C (Manufacturing). Instead, if the principal does not own the main material inputs, it should be classified in section G (Wholesale and trade).

However, the enterprise may be busily engaged in new product development and prototyping regardless of the fact whether it provides the material inputs or not.

Due to the fact that for many large multinational enterprises the product development is nowadays the main wealth-generating activity, the question of classification has a great impact on the structure of economy. The boundary between manufacturing and wholesale trade may need to be rethought. Also the option of classifying this kind of activity into other services could be an issue, because the real activity in company headquarters is often research and development, planning and management.

The measurement of the value of domestic output is another challenge for such business enterprises. This paper will however concentrate on the issue of defining the activity code and shedding light on the consequences of different solutions.

Keywords: outsourcing, globalisation, NACE Rev. 2, multinational enterprises, practical examples