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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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File URL: http://eprints.lse.ac.uk/19655/
File Function: Open access version.
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Bibliographic Info

Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 19655.

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Length: 50 pages
Date of creation: Dec 2007
Date of revision:
Handle: RePEc:ehl:lserod:19655

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

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  1. Werner Antweiler & Daniel Trefler, 2002. "Increasing Returns and All That: A View from Trade," American Economic Review, American Economic Association, vol. 92(1), pages 93-119, March.
  2. Peter K. Schott, 2004. "Across-product Versus Within-product Specialization in International Trade," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 119(2), pages 646-677, May.
  3. Grossman, Sanford J. & Hart, Oliver D., 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Scholarly Articles 3450060, Harvard University Department of Economics.
  4. Nathan Nunn, 2007. "Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 122(2), pages 569-600, 05.
  5. Tomiura, Eiichi, 2005. "Foreign outsourcing and firm-level characteristics: Evidence from Japanese manufacturers," Journal of the Japanese and International Economies, Elsevier, vol. 19(2), pages 255-271, June.
  6. Robert C. Feenstra & Gordon H. Hanson, 1996. "Globalization, Outsourcing, and Wage Inequality," NBER Working Papers 5424, National Bureau of Economic Research, Inc.
  7. Barbara J. Spencer, 2005. "International Outsourcing and Incomplete Contracts," NBER Working Papers 11418, National Bureau of Economic Research, Inc.
  8. Pol Antràs, 2003. "Firms, Contracts, and Trade Structure," NBER Working Papers 9740, National Bureau of Economic Research, Inc.
  9. Yeaple, Stephen & Helpman, Elhanan & Melitz, Marc, 2004. "Export versus FDI with Heterogeneous Firms," Scholarly Articles 3229098, Harvard University Department of Economics.
  10. Hart, Oliver D. & Moore, John, 1990. "Property Rights and the Nature of the Firm," Scholarly Articles 3448675, Harvard University Department of Economics.
  11. Gene M. Grossman & Elhanan Helpman, 2002. "Integration Versus Outsourcing In Industry Equilibrium," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 117(1), pages 85-120, February.
  12. Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," Journal of Economic Literature, American Economic Association, vol. 44(3), pages 589-630, September.
  13. Pol Antras, 2004. "Incomplete Contracts and the Product Cycle," 2004 Meeting Papers 19, Society for Economic Dynamics.
  14. Antràs, Pol & Helpman, Elhanan, 2004. "Global Sourcing," CEPR Discussion Papers 4170, C.E.P.R. Discussion Papers.
  15. Edward C. Norton & Hua Wang & Chunrong Ai, 2004. "Computing interaction effects and standard errors in logit and probit models," Stata Journal, StataCorp LP, StataCorp LP, vol. 4(2), pages 154-167, June.
  16. Gene M. Grossman & Elhanan Helpman, 2003. "Outsourcing Versus FDI in Industry Equilibrium," Journal of the European Economic Association, MIT Press, MIT Press, vol. 1(2-3), pages 317-327, 04/05.
  17. John McLaren, 2000. ""Globalization" and Vertical Structure," American Economic Review, American Economic Association, vol. 90(5), pages 1239-1254, December.
  18. S. Raspiller & P. Sillard, 2004. "Affiliating versus Subcontracting: the Case of Multinationals," Documents de Travail de la DESE - Working Papers of the DESE, Institut National de la Statistique et des Etudes Economiques, DESE g2004-09, Institut National de la Statistique et des Etudes Economiques, DESE.
  19. Eiichi Tomiura, 2005. "Foreign Outsourcing, Exporting, and FDI: A Productivity Comparison at the Firm Level," Discussion Paper Series, Research Institute for Economics & Business Administration, Kobe University 168, Research Institute for Economics & Business Administration, Kobe University.
  20. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
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  23. repec:hrv:faseco:4784029 is not listed on IDEAS
  24. Gene M. Grossman & Elhanan Helpman & Adam Szeidl, 2005. "Complementarities between Outsourcing and Foreign Sourcing," American Economic Review, American Economic Association, vol. 95(2), pages 19-24, May.
  25. Cabral, Luís M B & Mata, José, 2001. "On the Evolution of the Firm Size Distribution: Facts and Theory," CEPR Discussion Papers 3045, C.E.P.R. Discussion Papers.
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