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

Federico, Stefano, Outsourcing Versus Integration at Home or Abroad (February 22, 2010). Bank of Italy Temi di Discussione (Working Paper) No. 742, Available at SSRN: https://ssrn.com/abstract=1669959 or http://dx.doi.org/10.2139/ssrn.1669959

Stefano Federico (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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