Offshore Outsourcing Induced by Domestic Providers
We show that o®shore outsourcing can occur even when there are no economies of scale or cost advantages for the foreign firms. What drives the phenomenon is that domestic firms, by accepting orders for intermediate goods, incur the disadvantage of becoming Stackelberg followers in the ensuing competition to sell the final good. Thus they have incentive to quote high provider prices to ward o® future competitors, compelling them to outsource offshore.
|Date of creation:||May 2005|
|Date of revision:|
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- Yongmin Chen & Jota Ishikawa & Zhihao Yu, 2002.
"Trade Liberalization and Strategic Outsourcing,"
Carleton Economic Papers
02-12, Carleton University, Department of Economics, revised Jul 2004.
- Shy, Oz & Stenbacka, Rune, 2003. "Strategic outsourcing," Journal of Economic Behavior & Organization, Elsevier, vol. 50(2), pages 203-224, February.
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