Global Sourcing and Business & Social Networks: Quality Heterogeneity and Firms’ Efficiency

15 Pages Posted: 12 Jan 2010

See all articles by Giuseppe Vittucci Marzetti

Giuseppe Vittucci Marzetti

University of Milano-Bicocca - Department of Sociology and Social Research

Maria Luigia Segnana

University of Trento - Department of Economics and Management

Chiara Tomasi

Scuola Superiore Sant'Anna di Pisa; Scuola Superiore Sant'Anna di Pisa - Laboratory of Economics and Management (LEM)

Date Written: December 20, 2009

Abstract

Global sourcing can increase firms’ productivity via the quality upgrading of intermediates, but, because of the heterogeneity of suppliers, it also increases screening costs of final firms given the need to search for good suppliers. We build up a simple model to analyze these factors and show that large firms can better exploit the potential gains from quality upgrading. Moreover, we show that business & social networks make both the overall production and firms’ profitability increase via the reduction in firms’ unit screening costs. There are cumulative beneficial effects of these networks: Thicker networks imply higher cost saving and thus further incentives to invest in network linkages. Finally, we sketch a possible extension of the model to analyze the choice of local vs. global sourcing strategies and how their differences, in terms of costs, suppliers’ heterogeneity and degree of embeddedness in networks, affect firms’ choices and their efficiency.

Keywords: Delocalization, Outsourcing, Heterogeneity, Business & social networks, Search costs

JEL Classification: F130, F230, L140, L240, D850

Suggested Citation

Vittucci Marzetti, Giuseppe and Segnana, Maria Luigia and Tomasi, Chiara and Tomasi, Chiara, Global Sourcing and Business & Social Networks: Quality Heterogeneity and Firms’ Efficiency (December 20, 2009). Available at SSRN: https://ssrn.com/abstract=1534779 or http://dx.doi.org/10.2139/ssrn.1534779

Giuseppe Vittucci Marzetti (Contact Author)

University of Milano-Bicocca - Department of Sociology and Social Research ( email )

via Bicocca degli Arcimboldi, 8
Milano, MI 20126
Italy

HOME PAGE: http://https://www.unimib.it/giuseppe-vittucci-marzetti

Maria Luigia Segnana

University of Trento - Department of Economics and Management ( email )

Via Inama 5
Trento, I-38100
Italy

Chiara Tomasi

Scuola Superiore Sant'Anna di Pisa ( email )

Biblioteca Scuola Superiore Sant'Anna

Scuola Superiore Sant'Anna di Pisa - Laboratory of Economics and Management (LEM) ( email )

Piazza Martiri della Liberta, 33
Pisa, I-56127
Italy

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