We present a North-South model of international trade in which differentiated products are developed in the North. Sectors are populated by final-good producers who differ in productivity levels. Based on productivity and sectoral characteristics, firms decide whether to integrate into the production of intermediate inputs or outsource them. In either case they have to decide from which country to source the inputs. Final-good producers and their suppliers must make relationship-specific investments, both in an integrated firm and in an arm’s-length relationship. We describe an equilibrium in which firms with different productivity levels choose different ownership structures and supplier locations, i.e., they choose different organizational forms. We then study the effects of within-sectoral heterogeneity and variations in industry characteristics on the relative prevalence of these organizational forms. The analysis sheds light on the structure of foreign trade within and across industries.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
4170.
Pol Antràs & Elhanan Helpman, 2003.
"Global Sourcing,"
NBER Working Papers
10082, National Bureau of Economic Research, Inc.
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Find related papers by JEL classification: D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies F14 - International Economics - - Trade - - - Country and Industry Studies of Trade F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
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Dalia Marin & Thierry Verdier, 2004.
"Globalization and the Empowerment of Talent,"
Discussion Papers
1, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
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