Supplier Search and Rematching in Global Sourcing - Theory and Evidence from China

24 Pages Posted: 18 Jan 2018

See all articles by Fabrice Defever

Fabrice Defever

City University London

Christian Fischer

University of Freiburg - Department of Economics

Jens Suedekum

Heinrich-Heine-University Duesseldorf, Duesseldorf Institute for Competition Economics (DICE); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); Institute for the Study of Labor (IZA)

Date Written: November 28, 2017

Abstract

In this paper, we consider a dynamic search-and-matching problem of a firm with its intermediate input supplier. In our model, a headquarter currently matched with a supplier, has an interest to find and collaborate with a more efficient partner. However, supplier switching through search and re-matching is costly. Given this trade-off between the fixed costs and the expected gains from continued search, the process will stop whenever the headquarter has found a sufficiently efficient supplier. Using firm-product-level data of fresh Chinese exporters to the United States, we obtain empirical evidence in line with the predictions of our theory. In particular, we find that the share of short-term collaborations is higher in industries with more supplier-cost dispersion, an indication of higher expected search opportunities.

Keywords: input sourcing, relational contracts, supplier search

JEL Classification: F230, D230, L230

Suggested Citation

Defever, Fabrice and Fischer, Christian and Südekum, Jens, Supplier Search and Rematching in Global Sourcing - Theory and Evidence from China (November 28, 2017). CESifo Working Paper Series No. 6748, Available at SSRN: https://ssrn.com/abstract=3103681

Fabrice Defever

City University London ( email )

Northampton Square
London, EC1V OHB
United Kingdom

Christian Fischer

University of Freiburg - Department of Economics ( email )

Freiburg, D-79085
Germany

Jens Südekum (Contact Author)

Heinrich-Heine-University Duesseldorf, Duesseldorf Institute for Competition Economics (DICE) ( email )

Universitaetsstr. 1
Duesseldorf, NRW 40225
Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

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