Asymmetric Information and Global Sourcing
This paper aims to study the choice of offshoring modes made by multinationals in the presence of asymmetric information. We focus on two types of asymmetric information, namely hidden characteristics and hidden action. The former creates adverse selection problem, and the later leads to moral hazard problem, both of which incur non-trivial costs to multinationals. We show that different offshoring modes, including greenfield foreign direct investment, joint venture, and outsourcing, can serve as a means to overcome or mitigate the problem of information asymmetry. We study the conditions under which one particular type of offshore modes dominates the others. The model generates implications consistent with the patterns of the prevalence of various offshoring models over time, and across industries and countries.
|Date of creation:||Apr 2009|
|Contact details of provider:|| Postal: 2-1 Naka, Kunitachi City, Tokyo 186-8601|
Web page: http://www.econ.hit-u.ac.jp/~cces/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:hit:ccesdp:16. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Digital Resources Section, Hitotsubashi University Library)
If references are entirely missing, you can add them using this form.