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

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  • Liza Jabbour

Abstract

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.

Suggested Citation

  • Liza Jabbour, "undated". "Market Thickness, Sunk Entry Costs, Firm Heterogeneity and the Outsourcing Decision: Empirical Evidence of Manufacturing Firms in France," Discussion Papers 08/20, University of Nottingham, GEP.
  • Handle: RePEc:not:notgep:08/20
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    File URL: http://www.nottingham.ac.uk/gep/documents/papers/2008/08-20.pdf
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    References listed on IDEAS

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