Organizing Global Supply Chains: Input-Output Linkages and Vertical Integration

63 Pages Posted: 19 Nov 2018 Last revised: 29 Apr 2019

See all articles by Claudia Steinwender

Claudia Steinwender

Ludwig Maximilian University of Munich (LMU)

Giuseppe Berlingieri

ESSEC Business School - Economics Department; Organization for Economic Co-Operation and Development (OECD) - Directorate for Science, Technology and Industry (STI); London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP)

Frank Pisch

Technical University Darmstadt; London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP); University of St. Gallen - Swiss Institute for International Economics and Applied Economic Research

Multiple version iconThere are 2 versions of this paper

Date Written: November 2018

Abstract

We study whether and how the technological importance of an input â?? measured by its cost share â?? is related to the decision of whether to "make" or "buy" that input. Using detailed French international trade data and an instrumental variable approach based on self-constructed input-output tables, we show that French multinationals vertically integrate those inputs that have high cost shares. A stylized incomplete contracting model with both ex ante and ex post inefficiencies explains why: technologically more important inputs are "made" when transaction cost economics type forces (TCE; favoring integration) overpower property rights type forces (PRT; favoring outsourcing). Additional results related to the contracting environment and headquarters intensity consistent with our theoretical framework show

that both TCE and PRT type forces are needed to fully explain the empirical patterns in the data.

Keywords: direct requirements, input output relationship, intrafirm trade, Supply Chains, vertical integration

JEL Classification: F10, F14, L16, L23, O14

Suggested Citation

Steinwender, Claudia and Berlingieri, Giuseppe and Pisch, Frank, Organizing Global Supply Chains: Input-Output Linkages and Vertical Integration (November 2018). CEPR Discussion Paper No. DP13321, Available at SSRN: https://ssrn.com/abstract=3287068

Claudia Steinwender

Ludwig Maximilian University of Munich (LMU) ( email )

Geschwister-Scholl-Platz 1
Munich, DE Bavaria 80539
Germany

Giuseppe Berlingieri (Contact Author)

ESSEC Business School - Economics Department ( email )

95021 Cergy-Pontoise Cedex
France

Organization for Economic Co-Operation and Development (OECD) - Directorate for Science, Technology and Industry (STI) ( email )

Paris
France

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Frank Pisch

Technical University Darmstadt ( email )

United States

HOME PAGE: http://https://sites.google.com/site/frankpisch/home

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE
United Kingdom

HOME PAGE: http://https://sites.google.com/site/frankpisch/home

University of St. Gallen - Swiss Institute for International Economics and Applied Economic Research ( email )

Dufourstr. 48
St. Gallen, 9000
Switzerland

HOME PAGE: http://https://sites.google.com/site/frankpisch/home

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