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Cross-regional Variations in Offshore Outsourcing Choices: Evidence from Firm-level Data

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  • TOMIURA Eiichi
  • ITO Banri
  • WAKASUGI Ryuhei

Abstract

In offshoring, a firm chooses outsourcing to independent suppliers or in-sourcing from their FDI subsidiaries. This paper empirically examines how the factor intensity is related with the firm's offshore make-or-buy decision based on the Japanese direct firm-level data of offshoring across all manufacturing industries. This paper confirms that in-sourcing firms tend to be substantially more capital-intensive than outsourcing firms, even if firm size or industry is controlled for. Among the firms offshoring to China compared with North, firms with wider range of capital-labor ratio choose to integrate but relatively capital-intensive firms are active in outsourcing.

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Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 08029.

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Length: 23 pages
Date of creation: Aug 2008
Date of revision:
Handle: RePEc:eti:dpaper:08029

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  1. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June.
  2. Sourafel Girma & Holger Görg, 2004. "Outsourcing, Foreign Ownership, and Productivity: Evidence from UK Establishment-level Data," Review of International Economics, Wiley Blackwell, vol. 12(5), pages 817-832, November.
  3. Pol Antràs & Elhanan Helpman, 2003. "Global Sourcing," NBER Working Papers 10082, National Bureau of Economic Research, Inc.
  4. Antras, Pol, 2003. "Firms, Contracts, and Trade Structure," Scholarly Articles 3196328, Harvard University Department of Economics.
  5. Gene M. Grossman & Esteban Rossi-Hansberg, 2006. "Trading Tasks: A Simple Theory of Offshoring," NBER Working Papers 12721, National Bureau of Economic Research, Inc.
  6. Gorg, Holger & Hanley, Aoife, 2005. "International outsourcing and productivity: evidence from the Irish electronics industry," The North American Journal of Economics and Finance, Elsevier, vol. 16(2), pages 255-269, August.
  7. 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.
  8. 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.
  9. repec:hrv:faseco:4784029 is not listed on IDEAS
  10. Michael P. Keane & Susan E. Feinberg, 2006. "Accounting for the Growth of MNC-Based Trade Using a Structural Model of U.S. MNCs," American Economic Review, American Economic Association, vol. 96(5), pages 1515-1558, December.
  11. 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.
  12. ITO Banri & TOMIURA Eiichi & WAKASUGI Ryuhei, 2007. "Dissecting Offshore Outsourcing and R&D: A Survey of Japanese Manufacturing Firms," Discussion papers, Research Institute of Economy, Trade and Industry (RIETI) 07060, Research Institute of Economy, Trade and Industry (RIETI).
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