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Which firms are involved in foreign vertical integration?

  • Angels Pelegrín

    ()

    (University of Barcelona & IEB)

  • José García-Quevedo

    ()

    (University of Barcelona & IEB)

In line with the literature that considers that transaction costs, asset specificity and incomplete contracts play a key role in the “make or buy decision”, this paper seeks to discriminate the characteristics of firms that make them more or less likely to integrate their activities in a foreign country. We draw on firm level data for Spanish manufacturing firms from the Survey on Business Strategies (ESEE), which enable us to identify whether their imports are intra-firm (related party) or at arm’s-length (non-related party). Our results show that candidates for vertical integration are the most productive firms and those that receive a large share of their inputs from headquarters. We also demonstrate that international experience and product differentiation favor foreign integration even after controlling for other characteristics of the firm.

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Paper provided by Institut d'Economia de Barcelona (IEB) in its series Working Papers with number 2012/38.

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Length: 37 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:ieb:wpaper:2012/6/doc2012-38
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  1. Marin, Dalia, 2006. "A new international division of labor in Europe: Outsourcing and offshoring to Eastern Europe," Munich Reprints in Economics 19229, University of Munich, Department of Economics.
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  15. Lopez, Alberto, 2008. "Determinants of R&D cooperation: Evidence from Spanish manufacturing firms," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 113-136, January.
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