Foreign versus Domestic Outsourcing : Firm-level Evidence on the Role of Technology

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Abstract

The decision about where to outsource varies across firms and industries. General machinery heavily depends on domestic subcontractors, while outsourcing overseas is prevalent in apparel. Based on firm-level data explicitly distinguishing foreign outsourcing from domestic outsourcing in all manufacturing industries, this paper finds that firms tend to prefer domestic outsourcing to foreign outsourcing when they are R&D-intensive. This finding is consistent with incomplete contracting models, since technologically complex products are likely to require high-quality contracting environment and assembler-supplier proximity. This paper also finds that firms connected with computer networks are actively outsourcing.

Journal

  • International Review of Economics & Finance

    International Review of Economics & Finance 18(2), 219-226, 2008

    Elsevier

Codes

  • NII Article ID (NAID)
    120001723293
  • NII NACSIS-CAT ID (NCID)
    AA10925966
  • Text Lang
    ENG
  • Article Type
    journal article
  • ISSN
    1059-0560
  • Data Source
    IR 
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