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Foreign versus domestic outsourcing: Firm-level evidence on the role of technology

  • Tomiura, Eiichi

The decision about where to outsource varies across firms and industries. General machinery heavily depends on domestic subcontractors, while outsourcing overseas is prevalent in apparel. Based on firm-level data explicitly distinguishing foreign outsourcing from domestic outsourcing in all manufacturing industries, this paper finds that firms tend to prefer domestic outsourcing to foreign outsourcing when they are R&D-intensive. This finding is consistent with incomplete contracting models, since technologically complex products are likely to require high-quality contracting environment and assembler-supplier proximity. This paper also finds that firms connected with computer networks are actively outsourcing.

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Article provided by Elsevier in its journal International Review of Economics & Finance.

Volume (Year): 18 (2009)
Issue (Month): 2 (March)
Pages: 219-226

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Handle: RePEc:eee:reveco:v:18:y:2009:i:2:p:219-226
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620165

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  1. Antras, Pol & Helpman, Elhanan, 2007. "Contractual Frictions and Global Sourcing," CEPR Discussion Papers 6033, C.E.P.R. Discussion Papers.
  2. Pol Antr�s, 2005. "Incomplete Contracts and the Product Cycle," American Economic Review, American Economic Association, vol. 95(4), pages 1054-1073, September.
  3. Daron Acemoglu & Philippe Aghion & Rachel Griffith & Fabrizio Zilibotti, 2004. "Vertical integration and technology: theory and evidence," IFS Working Papers W04/34, Institute for Fiscal Studies.
  4. Oz Shy & Rune Stenbacka, 2005. "Partial outsourcing, monitoring cost, and market structure," Canadian Journal of Economics, Canadian Economics Association, vol. 38(4), pages 1173-1190, November.
  5. Glass, Amy Jocelyn & Saggi, Kamal, 2001. "Innovation and wage effects of international outsourcing," European Economic Review, Elsevier, vol. 45(1), pages 67-86, January.
  6. Pol Antràs & Elhanan Helpman, 2003. "Global Sourcing," NBER Working Papers 10082, National Bureau of Economic Research, Inc.
  7. repec:hrv:faseco:4784029 is not listed on IDEAS
  8. Pol Antràs, 2003. "Firms, Contracts, And Trade Structure," The Quarterly Journal of Economics, MIT Press, vol. 118(4), pages 1375-1418, November.
  9. 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.
  10. 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.
  11. Eiichi Tomiura, 2005. "Foreign Outsourcing, Exporting, and FDI: A Productivity Comparison at the Firm Level," Discussion Paper Series 168, Research Institute for Economics & Business Administration, Kobe University.
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