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Global Sourcing

Author

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  • Helpman, Elhanan
  • Antrà s, Pol

Abstract

We present a North-South model of international trade in which differentiated products are developed in the North. Sectors are populated by final-good producers who differ in productivity levels. Based on productivity and sectoral characteristics, firms decide whether to integrate into the production of intermediate inputs or outsource them. In either case they have to decide from which country to source the inputs. Final-good producers and their suppliers must make relationship-specific investments, both in an integrated firm and in an arm?s-length relationship. We describe an equilibrium in which firms with different productivity levels choose different ownership structures and supplier locations, i.e., they choose different organizational forms. We then study the effects of within-sectoral heterogeneity and variations in industry characteristics on the relative prevalence of these organizational forms. The analysis sheds light on the structure of foreign trade within and across industries.

Suggested Citation

  • Helpman, Elhanan & Antrà s, Pol, 2004. "Global Sourcing," CEPR Discussion Papers 4170, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:4170
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    References listed on IDEAS

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    1. Marin, Dalia & Verdier, Thierry, 2012. "Globalization and the empowerment of talent," Journal of International Economics, Elsevier, vol. 86(2), pages 209-223.
    2. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2003. "Export versus FDI," NBER Working Papers 9439, National Bureau of Economic Research, Inc.
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    20. repec:rus:hseeco:122439 is not listed on IDEAS
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Trade in intermediate inputs; Imperfect contracting; Property rights; Multinational firms;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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