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Input specificity and global sourcing

  • Van Assche, Ari
  • Schwartz, Galina A.
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    This paper identifies a new industry-equilibrium channel through which a firm's productivity affects its organizational choice. In a two-country model with firm heterogeneity and incomplete contracts, we show that the degree of input specificity and the hold-up friction in an outsourcing relation become a function of the final good firm's productivity when inputs are not completely specific. We examine the implications for the equilibrium international sorting pattern of firms.

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    File URL: http://www.sciencedirect.com/science/article/B6WMC-4XS6FFR-1/2/eb992a81aaf8947c84b035e5cd337d50
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    Article provided by Elsevier in its journal Journal of the Japanese and International Economies.

    Volume (Year): 24 (2010)
    Issue (Month): 1 (March)
    Pages: 69-85

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    Handle: RePEc:eee:jjieco:v:24:y:2010:i:1:p:69-85
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622903

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    1. Eiichi Tomiura, 2004. "Foreign outsourcing and firm-level characteristics: evidence from Japanese manufacturers," Hi-Stat Discussion Paper Series d04-64, Institute of Economic Research, Hitotsubashi University.
    2. Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
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    5. Grossman, Sanford J. & Hart, Oliver D., 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Scholarly Articles 3450060, Harvard University Department of Economics.
    6. Keith Head & John Ries & Barbara J. Spencer, 2002. "Vertical Networks and US Auto Parts Exports: Is Japan Different?," NBER Working Papers 9162, National Bureau of Economic Research, Inc.
    7. Williamson, Oliver E, 1979. "Transaction-Cost Economics: The Governance of Contractural Relations," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 233-61, October.
    8. Raghuram G. Rajan & Luigi Zingales, . "Power in a Theory of the Firm," CRSP working papers 335, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
    9. Fabrice Defever & Farid Toubal, 2007. "Productivity and the sourcing modes of multinational firms: evidence from French firm-level data," LSE Research Online Documents on Economics 19655, London School of Economics and Political Science, LSE Library.
    10. Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," Journal of Economic Literature, American Economic Association, vol. 44(3), pages 589-630, September.
    11. repec:hrv:faseco:4784029 is not listed on IDEAS
    12. Alireza Naghavi & Gianmarco Ottaviano, 2009. "Firm Heterogeneity, Contract Enforcement, and the Industry Dynamics of Offshoring," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(4), pages 629-653, December.
    13. Pol Antràs & Elhanan Helpman, 2003. "Global Sourcing," NBER Working Papers 10082, National Bureau of Economic Research, Inc.
    14. Barbara J. Spencer & Larry D. Qiu, 2000. "Keiretsu and Relationship-Specific Investment: A Barrier to Trade?," NBER Working Papers 7572, National Bureau of Economic Research, Inc.
    15. Andrabi, Tahir & Ghatak, Maitreesh & Khwaja, Asim Ijaz, 2006. "Subcontractors for tractors: Theory and evidence on flexible specialization, supplier selection, and contracting," Journal of Development Economics, Elsevier, vol. 79(2), pages 273-302, April.
    16. Christopher Johann Kurz, 2006. "Outstanding Outsourcers: A Firm- and Plant-Level Analysis of Production Sharing," Working Papers 06-02, Center for Economic Studies, U.S. Census Bureau.
    17. Barbara Spencer, 2005. "International outsourcing and incomplete contracts," Canadian Journal of Economics, Canadian Economics Association, vol. 38(4), pages 1107-1135, November.
    18. Erkal, Nisvan, 2007. "Buyer-supplier interaction, asset specificity, and product choice," International Journal of Industrial Organization, Elsevier, vol. 25(5), pages 988-1010, October.
    19. Gene M. Grossman & Elhanan Helpman & Adam Szeidl, 2005. "Complementarities between Outsourcing and Foreign Sourcing," American Economic Review, American Economic Association, vol. 95(2), pages 19-24, May.
    20. Robert C. Feenstra & Barbara J. Spencer, 2005. "Contractual Versus Generic Outsourcing: The Role of Proximity," NBER Working Papers 11885, National Bureau of Economic Research, Inc.
    21. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    22. Larry D. Qiu & Barbara J. Spencer, 2001. "Keiretsu and Relationship-Specific Investment: Implications for Market-Opening Trade Policy," NBER Working Papers 8279, National Bureau of Economic Research, Inc.
    23. Christopher Johann Kurz, 2006. "Outstanding outsourcers: a firm- and plant-level analysis of production sharing," Finance and Economics Discussion Series 2006-04, Board of Governors of the Federal Reserve System (U.S.).
    24. Gene M. Grossman & Elhanan Helpman, 2002. "Integration Versus Outsourcing In Industry Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 85-120, February.
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