Outsourcing Versus Integration at Home or Abroad
70 Pages Posted: 2 Sep 2010
Date Written: February 22, 2010
Abstract
Using data on a sample of Italian manufacturing companies, this paper analyzes the location (at home or abroad) and the mode of organization (outsourcing versus integration) of intermediate inputs production. We find evidence of a productivity ordering (largely consistent with the assumptions in Antràs and Helpman 2004) where foreign integration is chosen by the most productive and domestic outsourcing by the least productive firms; those with medium-high productivity choose domestic integration, those with medium-low productivity foreign outsourcing. We also find that the preference for integration over outsourcing is positively related to some indicators of headquarter intensity, notably capital intensity, as predicted by Antràs (2003) and Antràs and Helpman (2004).
Keywords: international outsourcing, foreign direct investment, intra-firm trade, productivity
JEL Classification: F12, F23, L22
Suggested Citation: Suggested Citation
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