Global sourcing by mne’s: impact on domestic firms
The unequal situation of large global firms with extensive networks and smaller domestic firms has created a dual structure in many industries. In this paper we examine the competitive position of domestic single-plant firms under growing rivalry of global companies that source abroad and flexibly coordinate production activities within a multinational network. Growing rivalry is modelled as a decrease in sourcing costs for multinational firms. We separate a direct and an indirect effect – i.e. competitive strategic effect- of a lower sourcing cost on the production decision of multinational and domestic firms. We show how cost characteristics of domestic firms determine the impact of these effects. We theoretically find that, ceteris paribus, output flexible firms will be most vulnerable and exit first from the market. Product differentiation is found to reduce the strategic effect of global sourcing by MNE’s on the competitive position of domestic firms.
|Date of creation:||24 May 2005|
|Contact details of provider:|| Postal: Reep 1, 9000 Gent|
Phone: +32 9 210 98 99
Fax: +32 9 210 97 00
Web page: http://www.vlerick.com
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:vlg:vlgwps:2005-7. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Isabelle Vandenbroere)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.