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Organizing Global Supply Chains: Input Cost Shares and Vertical Integration

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  • Giuseppe Berlingieri
  • Frank Pisch
  • Claudia Steinwender

Abstract

We study how the technological importance of inputs – measured by cost shares – is related to the decision to “make” or “buy” that input. Using detailed French international trade data and an instrumental variable approach based on self-constructed input-output tables, we show that multinationals vertically integrate high cost share inputs. A stylized incomplete contracting model with both ex-ante and ex-post inefficiencies explains why: technologically more important inputs are “made” when transaction cost economics type forces overpower property rights type forces. However, additional results show that both types forces are needed to explain the full patterns in the data.

Suggested Citation

  • Giuseppe Berlingieri & Frank Pisch & Claudia Steinwender, 2018. "Organizing Global Supply Chains: Input Cost Shares and Vertical Integration," NBER Working Papers 25286, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:25286
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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