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Market Thickness, Sunk Entry Costs, Firm Heterogeneity and the Outsourcing Decision: Empirical Evidence of Manufacturing Firms in France

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  • Liza Jabbour

Abstract

In this paper I investigate, empirically, the outsourcing strategy by firms in French manufacturing industries. I particularly focus on the effect of the market thickness and of firm heterogeneity on the outsourcing strategy. For this purpose, I estimate a dynamic probit model where I link the decision to outsource to previous outsourcing behaviour. I am able to estimate the sunk entry costs incurred by the firms when adopting an outsourcing strategy. The results show that outsourcing is a persistent strategy adopted by more productive firms and larger ones. They also show that market thickness reduces search costs and enhances the establishment of outsourcing relationships.

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  • Liza Jabbour, 2008. "Market Thickness, Sunk Entry Costs, Firm Heterogeneity and the Outsourcing Decision: Empirical Evidence of Manufacturing Firms in France," Discussion Papers 08/20, University of Nottingham, GEP.
    • Handle: RePEc:not:notgep:08/20
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    Cited by:

    1. Galdon-Sanchez, Jose Enrique & Gil, Ricard & Bayo-Moriones, Alberto, 2015. "Outsourcing of peripheral services: Evidence from Spanish manufacturing plant-level data," European Economic Review, Elsevier, vol. 78(C), pages 328-344.
    2. Pinuccia Calia & Silvia Pacei, 2017. "Outsourcing and Firm Performance: Evidence from the Italian Manufacturing Industry," International Journal of Business and Management, Canadian Center of Science and Education, vol. 12(11), pages 1-87, October.
    3. Liza Jabbour, 2010. "Offshoring and Firm Performance: Evidence from French Manufacturing Industry," The World Economy, Wiley Blackwell, vol. 33(3), pages 507-524, March.
    4. Jose A. Belso-Martinez, 2010. "Outsourcing Decisions, Product Innovation and the Spatial Dimension: Evidence from the Spanish Footwear Industry," Urban Studies, Urban Studies Journal Limited, vol. 47(14), pages 3057-3077, December.

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