Advanced Search
MyIDEAS: Login

Outsourcing, complementary innovations, and growth

Contents:

Author Info

  • Alireza Naghavi
  • Gianmarco I. P. Ottaviano

Abstract

This article studies the parallel creation of complementary innovations serving the upstream and downstream stages of a production chain with the aim of shedding light on the impact of outsourcing on R&D when supply contracts are incomplete. We argue that outsourced upstream production contributes to the emergence of innovation networks by creating a demand for upstream R&D. The bargaining weight of the two parties determines whether outsourcing decisions that lead to static specialization gains also generate dynamic gains when compared with vertically integrated production that relies on integrated R&D. In particular, growth is maximized when the bargaining power is split in a way that search and hold-up frictions are minimized. Putting this result next to the decision of firms to outsource, we conclude that complementary innovations are more likely to foster growth in Schumpeterian Mark I sectors, while vertical integration does so in Schumpeterian Mark II sectors. Copyright 2010 The Author 2010. Published by Oxford University Press on behalf of Associazione ICC. All rights reserved., Oxford University Press.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://hdl.handle.net/10.1093/icc/dtp051
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Oxford University Press in its journal Industrial and Corporate Change.

Volume (Year): 19 (2010)
Issue (Month): 4 (August)
Pages: 1009-1035

as in new window
Handle: RePEc:oup:indcch:v:19:y:2010:i:4:p:1009-1035

Contact details of provider:
Postal: Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK
Fax: 01865 267 985
Email:
Web page: http://icc.oupjournals.org/

Order Information:
Web: http://www.oup.co.uk/journals

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Gene M. Grossman & Elhanan Helpman, 2002. "Outsourcing versus FDI in Industry Equilibrium," Working Papers 148, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics..
  2. Hart, Oliver D. & Moore, John, 1990. "Property Rights and the Nature of the Firm," Scholarly Articles 3448675, Harvard University Department of Economics.
  3. Pol Antràs, 2003. "Firms, Contracts, and Trade Structure," NBER Working Papers 9740, National Bureau of Economic Research, Inc.
  4. Marin, Dalia & Verdier, Thierry, 2002. "Globalization and the 'New Enterprise'," Discussion Papers in Economics 11, University of Munich, Department of Economics.
  5. Robert C. Feenstra, 1998. "Integration of Trade and Disintegration of Production in the Global Economy," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 31-50, Fall.
  6. Edwin Lai & Raymond Riezman & Ping Wang, 2009. "Outsourcing of innovation," Economic Theory, Springer, vol. 38(3), pages 485-515, March.
  7. Daron Acemoglu & Philippe Aghion & Fabrizio Zilibotti, 2006. "Distance to Frontier, Selection, and Economic Growth," Journal of the European Economic Association, MIT Press, vol. 4(1), pages 37-74, 03.
  8. Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," Harvard Institute of Economic Research Working Papers 2118, Harvard - Institute of Economic Research.
  9. Grossman, Sanford J & Hart, Oliver, 1985. "The Cost and Benefits of Ownership: A Theory of Vertical and Lateral Integration," CEPR Discussion Papers 70, C.E.P.R. Discussion Papers.
  10. Markusen, James R., 2002. "Multinational Firms and the Theory of International Trade," MPRA Paper 8380, University Library of Munich, Germany.
  11. Robert C. Feenstra & Gordon H. Hanson, 2004. "Ownership and Control in Outsourcing to China: Estimating the Property-Rights Theory of the Firm," NBER Working Papers 10198, National Bureau of Economic Research, Inc.
  12. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-84, August.
  13. Naghavi, Alireza & Ottaviano, Gianmarco Ireo Paolo, 2006. "Outsourcing, Contracts and Innovation Networks," CEPR Discussion Papers 5681, C.E.P.R. Discussion Papers.
  14. Ottaviano, Gianmarco Ireo Paolo, 2007. "Contract Enforcement, Comparative Advantage and Long-Run Growth," CEPR Discussion Papers 6419, C.E.P.R. Discussion Papers.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Cassey LEE, 2012. "Knowledge Flows, Organization and Innovation: Firm-Level Evidence from Malaysia," Working Papers DP-2012-11, Economic Research Institute for ASEAN and East Asia (ERIA).
  2. Fabrice Defever, 2011. "Incomplete Contracts and the Impact of Globalization on Consumer Welfare," CEP Discussion Papers dp1057, Centre for Economic Performance, LSE.
  3. Lionel Fontagné & Guillaume Gaulier & Soledad Zignago, 2008. "Specialization across varieties and North-South competition," Economic Policy, CEPR & CES & MSH, vol. 23, pages 51-91, 01.
  4. Naghavi, Alireza & Ottaviano, Gianmarco Ireo Paolo, 2006. "Offshoring and Product Innovation," CEPR Discussion Papers 6008, C.E.P.R. Discussion Papers.
  5. Ottaviano, Gianmarco Ireo Paolo, 2007. "Contract Enforcement, Comparative Advantage and Long-Run Growth," CEPR Discussion Papers 6419, C.E.P.R. Discussion Papers.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:oup:indcch:v:19:y:2010:i:4:p:1009-1035. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.