Contractual Versus Generic Outsourcing: The Role of Proximity
AbstractWe explore the relationship between proximity of buyers and sellers and the organizational form of outsourcing. Outsourcing can be "contractual" in which suppliers undertake specific investments or involve "generic" market transactions. Proximity expands the variety of products sourced through contracts abroad rather than at home, but the range of generic imports is unchanged. A higher-quality foreign workforce raises the variety of contractual trade, but at the expense of generics. We confirm these predictions using data for ordinary versus processing exports from Chinese provinces to destination markets and also the predictions of an extended model that allows for multinational production.
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Date of creation: Dec 2005
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Find related papers by JEL classification:
- F1 - International Economics - - Trade
- L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-01-01 (All new papers)
- NEP-BEC-2006-01-01 (Business Economics)
- NEP-INT-2006-01-01 (International Trade)
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