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International Outsourcing and Incomplete Contracts

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Barbara J. Spencer

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Abstract

International outsourcing to lower cost countries such as China and India can best be understood through the enrichment of trade models to include concepts from industrial organization and contract theory that explain the vertical organization of production. The combination of trade with the choice of organizational form represents an important new area for both theoretical and empirical research. This survey paper provides a perspective on this new literature so as to gain insights into the forces driving international outsourcing. The paper focuses on relationship-specific investment, incomplete contracts, and also search and matching, as fundamental concepts that explain outsourcing decisions.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11418.

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Date of creation: Jun 2005
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Handle: RePEc:nbr:nberwo:11418

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Find related papers by JEL classification:
F1 - International Economics - - Trade
L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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  1. Ricardo J. Caballero & Mohamad L. Hammour, 1998. "The Macroeconomics of Specificity," Journal of Political Economy, University of Chicago Press, vol. 106(4), pages 724-767, August. [Downloadable!] (restricted)
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