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Productivity and the Sourcing Modes of Multinational Firms: Evidence from French Firm-Level Data

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  • Fabrice Defever
  • Farid Toubal

Abstract

We investigate the role of a firm's total factor productivity in its decision to import from their affiliates rather than from independent input suppliers. We propose a slightly modified version of the Antràs and Helpman (2004) model. We assume higher fixed costs under outsourcing and a firm-specific production function. We use detailed French firm-level data that provides a geographical breakdown of French firms' import at product level and their sourcing modes in 1999. We find strong empirical support for the theoretical predictions of the model. In particular, high-productivity firms that have a production process intensive in suppliers' inputs source their inputs through independent foreign suppliers.

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Bibliographic Info

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0842.

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Date of creation: Dec 2007
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Handle: RePEc:cep:cepdps:dp0842

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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Keywords: Productivity; Incomplete Contracts; Intra-firm Trade; Outsourcing;

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