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Competition and the location of overseas assembly

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  • Deborah L. Swenson

Abstract

How does international competition affect overseas outsourcing? To address this question, this paper studies production decisions in the U.S.'s overseas assembly program (OAP). In this setting, a number of regularities emerge. First, prior participation is highly correlated with current participation, which suggests that sunk costs influence outsourcing choices. Second, increases in own-country costs and declines in competitor-country costs reduce participation probabilities. In addition, these persistence and cost effects are much larger for outsourcing in developing countries. Finally, outsourcing responses appear to reflect differences in 'market thickness,' as cost sensitivity generally rises with competitor presence.

Suggested Citation

  • Deborah L. Swenson, 2007. "Competition and the location of overseas assembly," Canadian Journal of Economics, Canadian Economics Association, vol. 40(1), pages 155-175, February.
  • Handle: RePEc:cje:issued:v:40:y:2007:i:1:p:155-175
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    References listed on IDEAS

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    1. Swenson, Deborah L., 2005. "Overseas assembly and country sourcing choices," Journal of International Economics, Elsevier, vol. 66(1), pages 107-130, May.
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    Cited by:

    1. Amador, João & Cabral, Sónia, 2014. "Global value chains: surveying drivers and measures," Working Paper Series 1739, European Central Bank.
    2. Broocks, Annette & Van Biesebroeck, Johannes, 2017. "The impact of export promotion on export market entry," Journal of International Economics, Elsevier, vol. 107(C), pages 19-33.
    3. Thomas Hutzschenreuter & Florian Gröne, 2009. "Changing Vertical Integration Strategies under Pressure from Foreign Competition: The Case of US and German Multinationals," Journal of Management Studies, Wiley Blackwell, vol. 46(2), pages 269-307, March.
    4. João Amador & Sónia Cabral, 2014. "Global Value Chains: Surveying Drivers, Measures and Impacts," Working Papers w201403, Banco de Portugal, Economics and Research Department.
    5. repec:bla:presci:v:96:y:2017:i:2:p:299-323 is not listed on IDEAS
    6. Yamashita, Nobuaki, 2011. "Production sharing and trade flows: A comparative analysis of Japan and the US," Journal of Asian Economics, Elsevier, vol. 22(5), pages 383-397, October.

    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • F2 - International Economics - - International Factor Movements and International Business

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