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Global Sourcing of Complex Production Processes

  • Christian Schwarz
  • Jens Suedekum

We develop a theory of a firm in an incomplete contracts environment which decides on its complexity, organization, and global scale. Specifically, the firm decides i) how thinly it wants to slice its production process by choosing the mass of symmetric intermediate inputs that are simultaneously combined to a final product, ii) if the supplier of each component is an external contractor or an integrated affiliate, and iii) if that component is offshored to a foreign country. We also consider the case of asymmetric inputs. Our model leads to a rich set of novel predictions about the structure of multinational firms that are consistent with stylized facts from the recent empirical literature.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3559.

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Date of creation: 2011
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Handle: RePEc:ces:ceswps:_3559
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  6. Johannes Van Biesebroeck & Lijun ZHANG, 2011. "Global sourcing of a complex good," Working Papers Department of Economics ces11.26, KU Leuven, Faculty of Economics and Business, Department of Economics.
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  25. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2011. "The Empirics of Firm Heterogeneity and International Trade," CEP Discussion Papers dp1084, Centre for Economic Performance, LSE.
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  29. Du, Julan & Lu, Yi & Tao, Zhigang, 2009. "Bi-sourcing in the global economy," Journal of International Economics, Elsevier, vol. 77(2), pages 215-222, April.
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