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Competition and the location of overseas assembly

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Author Info
Deborah L. Swenson

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Abstract

How does international competition affect overseas outsourcing? To address this question, this paper studies production decisions in the U.S.'s overseas assembly program (OAP). In this setting, a number of regularities emerge. First, prior participation is highly correlated with current participation, which suggests that sunk costs influence outsourcing choices. Second, increases in own-country costs and declines in competitor-country costs reduce participation probabilities. In addition, these persistence and cost effects are much larger for outsourcing in developing countries. Finally, outsourcing responses appear to reflect differences in 'market thickness,' as cost sensitivity generally rises with competitor presence.

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File URL: http://economics.ca/cgi/xms?jab=v40n1/CJEv40n1p0155.pdf
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Publisher Info
Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 40 (2007)
Issue (Month): 1 (February)
Pages: 155-175
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Handle: RePEc:cje:issued:v:40:y:2007:i:1:p:155-175

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Related research
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Find related papers by JEL classification:
F1 - International Economics - - Trade
F2 - International Economics - - International Factor Movements and International Business

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This page was last updated on 2009-11-25.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.