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Productivity and the Sourcing Modes of Multinational Firms: Evidence from French Firm-Level Data

Listed author(s):
  • Fabrice Defever
  • Farid Toubal

We investigate the role of a firm's total factor productivity in its decision to import from their affiliates rather than from independent input suppliers. We propose a slightly modified version of the Antràs and Helpman (2004) model. We assume higher fixed costs under outsourcing and a firm-specific production function. We use detailed French firm-level data that provides a geographical breakdown of French firms' import at product level and their sourcing modes in 1999. We find strong empirical support for the theoretical predictions of the model. In particular, high-productivity firms that have a production process intensive in suppliers' inputs source their inputs through independent foreign suppliers.

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File URL: http://cep.lse.ac.uk/pubs/download/dp0842.pdf
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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0842.

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Date of creation: Dec 2007
Handle: RePEc:cep:cepdps:dp0842
Contact details of provider: Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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  1. Gene M. Grossman & Elhanan Helpman, 2005. "Outsourcing in a Global Economy," Review of Economic Studies, Oxford University Press, vol. 72(1), pages 135-159.
  2. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
  3. Gene M. Grossman & Elhanan Helpman, 2002. "Outsourcing versus FDI in Industry Equilibrium?," Harvard Institute of Economic Research Working Papers 1965, Harvard - Institute of Economic Research.
  4. Oliver Hart & Sanford Grossman, 1985. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Working papers 372, Massachusetts Institute of Technology (MIT), Department of Economics.
  5. Edward C. Norton & Hua Wang & Chunrong Ai, 2004. "Computing interaction effects and standard errors in logit and probit models," Stata Journal, StataCorp LP, vol. 4(2), pages 154-167, June.
  6. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
  7. Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," NBER Working Papers 12091, National Bureau of Economic Research, Inc.
  8. Oliver Hart & John Moore, 1988. "Property Rights and the Nature of the Firm," Working papers 495, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Luís M B Cabral & José Mata, 2003. "On the Evolution of the Firm Size Distribution: Facts and Theory," American Economic Review, American Economic Association, vol. 93(4), pages 1075-1090, September.
  10. S. Raspiller & P. Sillard, 2004. "Affiliating versus Subcontracting: the Case of Multinationals," Documents de Travail de la DESE - Working Papers of the DESE g2004-09, Institut National de la Statistique et des Etudes Economiques, DESE.
  11. Antràs, Pol & Helpman, Elhanan, 2004. "Global Sourcing," CEPR Discussion Papers 4170, C.E.P.R. Discussion Papers.
  12. Pol Antras, 2004. "Incomplete Contracts and the Product Cycle," 2004 Meeting Papers 19, Society for Economic Dynamics.
  13. Nathan Nunn, 2005. "Relationship Specificity, Incomplete Contracts and the Pattern of Trade," International Trade 0512018, EconWPA.
  14. John McLaren, 2000. ""Globalization" and Vertical Structure," American Economic Review, American Economic Association, vol. 90(5), pages 1239-1254, December.
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  16. Werner Antweiler & Daniel Trefler, 2000. "Increasing Returns and All That: A View From Trade," NBER Working Papers 7941, National Bureau of Economic Research, Inc.
  17. repec:hrv:faseco:4784029 is not listed on IDEAS
  18. Feenstra, Robert C & Hanson, Gordon H, 1996. "Globalization, Outsourcing, and Wage Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 240-245, May.
  19. 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.
  20. Barbara J. Spencer, 2005. "International Outsourcing and Incomplete Contracts," NBER Working Papers 11418, National Bureau of Economic Research, Inc.
  21. John Sutton, 1997. "Gibrat's Legacy," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 40-59, March.
  22. Tomiura, Eiichi, 2007. "Foreign outsourcing, exporting, and FDI: A productivity comparison at the firm level," Journal of International Economics, Elsevier, vol. 72(1), pages 113-127, May.
  23. Gene M. Grossman & Elhanan Helpman, 2002. "Integration versus Outsourcing in Industry Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 85-120.
  24. Porter, Michael E, 1974. "Consumer Behavior, Retailer Power and Market Performance in Consumer Goods Industries," The Review of Economics and Statistics, MIT Press, vol. 56(4), pages 419-436, November.
  25. Stephen Ross Yeaple, 2006. "Offshoring, Foreign Direct Investment, and the Structure of U.S. Trade," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 602-611, 04-05.
  26. 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.
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