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Market Thickness, Sunk Entry Costs, Firm Heterogeneity and the Outsourcing Decision: Empirical Evidence of Manufacturing Firms in France

  • Liza Jabbour

In this paper I investigate, empirically, the outsourcing strategy by firms in French manufacturing industries. I particularly focus on the effect of the market thickness and of firm heterogeneity on the outsourcing strategy. For this purpose, I estimate a dynamic probit model where I link the decision to outsource to previous outsourcing behaviour. I am able to estimate the sunk entry costs incurred by the firms when adopting an outsourcing strategy. The results show that outsourcing is a persistent strategy adopted by more productive firms and larger ones. They also show that market thickness reduces search costs and enhances the establishment of outsourcing relationships.

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Paper provided by University of Nottingham, GEP in its series Discussion Papers with number 08/20.

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Handle: RePEc:not:notgep:08/20
Contact details of provider: Postal: School of Economics University of Nottingham University Park Nottingham NG7 2RD
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  1. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-97, November.
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  14. Liza Jabbour, 2012. "‘Slicing the Value Chain’ Internationally: Empirical Evidence on the Offshoring Strategy by French Firms," The World Economy, Wiley Blackwell, vol. 35(11), pages 1417-1447, November.
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  19. Jeffrey M. Wooldridge, 2005. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(1), pages 39-54.
  20. repec:hrv:faseco:4784029 is not listed on IDEAS
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