Input Characteristics and the Mode of Offshoring: Evidence for French Firms
43 Pages Posted: 9 Nov 2010
Date Written: November 8, 2010
Using rich data on the international transactions of intermediate inputs by French firms we investigate the determinants of the choice between vertical integration and outsourcing at the international level. Our results show that the probability of vertical integration is reduced by the extent of asset specificity of imported inputs and enhanced by the significance of the inputs in the cost share of the firm. Our findings provide support for the property right models of offshoring and also for the knowledge capital model.
Keywords: Offshoring, Transaction Costs, Property Rights Theory, Knowledge-Capital
JEL Classification: D23, F14, L22, L23, L60
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