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International Outsourcing and Incomplete Contracts

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  • Barbara J. Spencer

Abstract

International outsourcing to lower cost countries such as China and India can best be understood through the enrichment of trade models to include concepts from industrial organization and contract theory that explain the vertical organization of production. The combination of trade with the choice of organizational form represents an important new area for both theoretical and empirical research. This survey paper provides a perspective on this new literature so as to gain insights into the forces driving international outsourcing. The paper focuses on relationship-specific investment, incomplete contracts, and also search and matching, as fundamental concepts that explain outsourcing decisions.

Suggested Citation

  • Barbara J. Spencer, 2005. "International Outsourcing and Incomplete Contracts," NBER Working Papers 11418, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:11418
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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