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Productivity, Relationship-Specific Inputs and the Sourcing Modes of Multinationals

  • Defever, Fabrice
  • Toubal, Farid

We investigate the roles of productivity and the specificity of inputs for the international sourcing strategy of firms which are part of a multinational network. We present a framework in which firms decide to import from a foreign independent supplier or from their related party abroad according to these two dimensions. We use a detailed survey that provides a detailed geographical breakdown of French firms' imports at the product level as well as the sourcing mode used for each transaction. The dataset also provides information to estimate the firms' productivity and their intensity in relationship-specific inputs. After controlling for countries of origin, products and sectors specific effects, the empirical results provide evidence that for the most productive multinationals the likelihood of trading through an independent supplier is higher especially if they use relationship-specific inputs intensively.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8656.

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Date of creation: Nov 2011
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Handle: RePEc:cpr:ceprdp:8656
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  1. Gene M. Grossman & Elhanan Helpman, 2002. "Outsourcing in a Global Economy," NBER Working Papers 8728, National Bureau of Economic Research, Inc.
  2. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2010. "Intra-Firm Trade and Product Contractibility," Working Paper Series WP10-3, Peterson Institute for International Economics.
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  4. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-58, December.
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  8. Arnaud Costinot & Lindsay Oldenski & James Rauch, 2011. "Adaptation and the Boundary of Multinational Firms," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 298-308, February.
  9. Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," Journal of Economic Literature, American Economic Association, vol. 44(3), pages 589-630, September.
  10. Jacques Cremer & Luis Garicano & Andrea Prat, 2006. "Language and the Theory of the Firm," Levine's Bibliography 784828000000000373, UCLA Department of Economics.
  11. 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.
  12. Grossman, Gene & Helpman, Elhanan, 2002. "Outsourcing Versus FDI in Industry Equilibrium," CEPR Discussion Papers 3647, C.E.P.R. Discussion Papers.
  13. Nathan Nunn, 2005. "Relationship Specificity, Incomplete Contracts and the Pattern of Trade," International Trade 0512018, EconWPA.
  14. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
  15. Pol Antras, 2004. "Incomplete Contracts and the Product Cycle," 2004 Meeting Papers 19, Society for Economic Dynamics.
  16. Paola Conconi & Patrick Legros & Andrew F. Newman, 2008. "Trade Liberalization and Organizational Change," Development Working Papers 262, Centro Studi Luca d\'Agliano, University of Milano.
  17. Antràs, Pol & Helpman, Elhanan, 2004. "Global Sourcing," CEPR Discussion Papers 4170, C.E.P.R. Discussion Papers.
  18. Hartmut Egger & Udo Kreickemeier, 2013. "Why Foreign Ownership May Be Good For You," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(2), pages 693-716, 05.
  19. Egger, Peter & Fahn, Matthias & Merlo, Valeria & Wamser, Georg, 2014. "On the genesis of multinational foreign affiliate networks," European Economic Review, Elsevier, vol. 65(C), pages 136-163.
  20. Wilhelm Kohler & Marcel Smolka, 2009. "Global Sourcing Decisions and Firm Productivity: Evidence from Spain," CESifo Working Paper Series 2903, CESifo Group Munich.
  21. 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.
  22. Francine Lafontaine & Margaret Slade, 2007. "Vertical Integration and Firm Boundaries: The Evidence," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 629-685, September.
  23. Fabrice Defever, 2011. "Incomplete Contracts and the Impact of Globalization on Consumer Welfare," CESifo Working Paper Series 3484, CESifo Group Munich.
  24. 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.
  25. repec:ulb:ulbeco:2013/137536 is not listed on IDEAS
  26. Barbara J. Spencer, 2005. "International Outsourcing and Incomplete Contracts," NBER Working Papers 11418, National Bureau of Economic Research, Inc.
  27. Feenstra, Robert C & Hanson, Gordon H, 1996. "Globalization, Outsourcing, and Wage Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 240-45, May.
  28. repec:hrv:faseco:4784029 is not listed on IDEAS
  29. Nunn, Nathan & Trefler, Daniel, 2013. "Incomplete contracts and the boundaries of the multinational firm," Journal of Economic Behavior & Organization, Elsevier, vol. 94(C), pages 330-344.
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