IDEAS home Printed from https://ideas.repec.org/p/lmu/muenec/29631.html
   My bibliography  Save this paper

Information Technology and Global Sourcing

Author

Listed:
  • Fromenteau, Philippe

Abstract

This paper examines how IT influences global sourcing decisions. It develops a theoretical model to study how IT determines the decisions of firms located in the high-wage North whether to offshore production to a low-wage country in the South. Offshoring to South however is subject to costly communication reflected by partially incomplete contracting. More sophisticated IT allows more efficient communication between the Northern headquarter and its Southern intermediate input supplier and alleviates contractual frictions. The model provides several predictions about the impact of IT on the organization of the global supply chain. Complex industries for which codifiability and verifiability of information is a much harder task, are more likely to source intermediate inputs in countries with more efficient IT infrastructure. Considering the mode of firm organization, more efficient IT infrastructure is expected to reduce the share of intra-firm trade in more complex industries. These predictions are examined and validated using disaggregated industry-level trade data. Most importantly, these findings are robust to controlling for well-known sources of comparative advantage and determinants of firm organization such as factor endowments, financial development and contract enforcement.

Suggested Citation

  • Fromenteau, Philippe, 2016. "Information Technology and Global Sourcing," Discussion Papers in Economics 29631, University of Munich, Department of Economics.
  • Handle: RePEc:lmu:muenec:29631
    as

    Download full text from publisher

    File URL: https://epub.ub.uni-muenchen.de/29631/1/phillipefromenteau.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Gregory Corcos & Delphine M. Irac & Giordano Mion & Thierry Verdier, 2013. "The Determinants of Intrafirm Trade: Evidence from French Firms," The Review of Economics and Statistics, MIT Press, vol. 95(3), pages 825-838, July.
    2. 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.
    3. Basco, Sergi, 2013. "Financial development and the product cycle," Journal of Economic Behavior & Organization, Elsevier, vol. 94(C), pages 295-313.
    4. Robert C. Feenstra & Gordon H. Hanson, 2005. "Ownership and Control in Outsourcing to China: Estimating the Property-Rights Theory of the Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 729-761.
    5. Anca Cristea, 2015. "The effect of communication costs on trade in headquarter services," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 151(2), pages 255-289, May.
    6. Fink, Carsten & Mattoo, Aaditya & Neagu, Ileana Cristina, 2005. "Assessing the impact of communication costs on international trade," Journal of International Economics, Elsevier, vol. 67(2), pages 428-445, December.
    7. Oldenski, Lindsay, 2012. "Export Versus FDI and the Communication of Complex Information," Journal of International Economics, Elsevier, vol. 87(2), pages 312-322.
    8. Juan Carluccio & Thibault Fally, 2012. "Global Sourcing under Imperfect Capital Markets," The Review of Economics and Statistics, MIT Press, vol. 94(3), pages 740-763, August.
    9. Elhanan Helpman & Dalia Marin & Thierry Verdier, 2008. "The Organisation of Firms in a Global Economy: Introduction," Post-Print halshs-00754767, HAL.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Information Technology; Global Sourcing; Multinational Firm; Firm Organization; Tasks;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lmu:muenec:29631. 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: (Tamilla Benkelberg). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.