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The role of overseas Chinese-speaking regions in global sourcing

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  • Lo, Chu-Ping
  • Wu, Shih-Jye
  • Hsu, Su-Ying

Abstract

Why do many of the world's most productive firms prefer global outsourcing to FDI? To address this issue, this paper introduces an intermediate-good producer to Antràs and Helpman's (2004) North–South model, where the Northern firms can employ the producer via an outsourcing contract and have the producer engage in FDI in the South. This strategy could substantially reduce both the incomplete contract distortion and the associated tailoring cost if the intermediate-good producer shares ethnic heritage with the South. Then, the most productive firms, not only in the consumer electronics but also the labor-intensive industries, overwhelmingly apply this strategy rather than FDI.

Suggested Citation

  • Lo, Chu-Ping & Wu, Shih-Jye & Hsu, Su-Ying, 2014. "The role of overseas Chinese-speaking regions in global sourcing," China Economic Review, Elsevier, vol. 30(C), pages 133-142.
    • Handle: RePEc:eee:chieco:v:30:y:2014:i:c:p:133-142
    DOI: 10.1016/j.chieco.2014.05.018
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    References listed on IDEAS

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    More about this item

    Keywords

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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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