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Global sourcing of complex production processes

Listed author(s):
  • Schwarz, Christian
  • Suedekum, Jens

We develop a theory of a firm in an incomplete contracts environment which decides on the complexity, the organization, and the global scale of its production process. Specifically, the firm decides i) how many intermediate inputs are simultaneously combined to a final product, ii) if the supplier of each input is an external contractor or an integrated affiliate, and iii) if that input is offshored to a foreign country. Our model leads to a rich set of predictions on the internal structure of multinational firms. In particular, it provides an explanation why many firms choose hybrid sourcing and have both outsourced and integrated suppliers.

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File URL: https://www.econstor.eu/bitstream/10419/88550/1/774602627.pdf
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Paper provided by Düsseldorf Institute for Competition Economics (DICE), University of Düsseldorf in its series DICE Discussion Papers with number 125.

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Date of creation: 2013
Handle: RePEc:zbw:dicedp:125
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  1. Pol Antràs & Davin Chor, 2013. "Organizing the Global Value Chain," Econometrica, Econometric Society, vol. 81(6), pages 2127-2204, November.
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