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Productivity and the sourcing modes of multinational firms: evidence from French firm-level data

  • 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://eprints.lse.ac.uk/19655/
File Function: Open access version.
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Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 19655.

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Length: 50 pages
Date of creation: Dec 2007
Date of revision:
Handle: RePEc:ehl:lserod:19655
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  1. John McLaren, 2000. ""Globalization" and Vertical Structure," American Economic Review, American Economic Association, vol. 90(5), pages 1239-1254, December.
  2. Werner Antweiler & Daniel Trefler, 2000. "Increasing Returns and All That: A View From Trade," NBER Working Papers 7941, National Bureau of Economic Research, Inc.
  3. Pol Antràs, 2003. "Firms, Contracts, And Trade Structure," The Quarterly Journal of Economics, MIT Press, vol. 118(4), pages 1375-1418, November.
  4. Cabral, Luís M B & Mata, José, 2001. "On the Evolution of the Firm Size Distribution: Facts and Theory," CEPR Discussion Papers 3045, C.E.P.R. Discussion Papers.
  5. Antras, Pol, 2005. "Incomplete Contracts and the Product Cycle," Scholarly Articles 3196324, Harvard University Department of Economics.
  6. Gene M. Grossman & Elhanan Helpman, 2002. "Outsourcing versus FDI in Industry Equilibrium," Working Papers 148, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics..
  7. Antràs, Pol & Helpman, Elhanan, 2004. "Global Sourcing," CEPR Discussion Papers 4170, C.E.P.R. Discussion Papers.
  8. Yeaple, Stephen & Helpman, Elhanan & Melitz, Marc, 2004. "Export versus FDI with Heterogeneous Firms," Scholarly Articles 3229098, Harvard University Department of Economics.
  9. Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," Harvard Institute of Economic Research Working Papers 2118, Harvard - Institute of Economic Research.
  10. John Sutton, 1997. "Gibrat's Legacy," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 40-59, March.
  11. Tomiura, Eiichi, 2005. "Foreign outsourcing and firm-level characteristics: Evidence from Japanese manufacturers," Journal of the Japanese and International Economies, Elsevier, vol. 19(2), pages 255-271, June.
  12. 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.
  13. 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.
  14. 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.
  15. Grossman, Sanford J. & Hart, Oliver D., 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Scholarly Articles 3450060, Harvard University Department of Economics.
  16. Nathan Nunn, 2007. "Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade," The Quarterly Journal of Economics, MIT Press, vol. 122(2), pages 569-600, 05.
  17. 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 419-36, November.
  18. 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.
  19. Peter K. Schott, 2004. "Across-product Versus Within-product Specialization in International Trade," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 646-677, May.
  20. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
  21. repec:hrv:faseco:4784029 is not listed on IDEAS
  22. 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.
  23. 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.
  24. Barbara Spencer, 2005. "International outsourcing and incomplete contracts," Canadian Journal of Economics, Canadian Economics Association, vol. 38(4), pages 1107-1135, November.
  25. 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.
  26. Gene M. Grossman & Elhanan Helpman, 2002. "Integration Versus Outsourcing In Industry Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 85-120, February.
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