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Title:Global sourcing of complex production processes PDF Logo
Authors:Schwarz, Christian
Suedekum, Jens
Issue Date:2011
Series/Report no.:CESifo working paper: Trade Policy 3559
Abstract:We develop a theory of a firm in an incomplete contracts environment which decides on its complexity, organization, and global scale. Specifically, the firm decides i) how thinly it wants to slice its production process by choosing the mass of symmetric intermediate inputs that are simultaneously combined to a final product, ii) if the supplier of each component is an external contractor or an integrated affiliate, and iii) if that component is offshored to a foreign country. We also consider the case of asymmetric inputs. Our model leads to a rich set of novel predictions about the structure of multinational firms that are consistent with stylized facts from the recent empirical literature.
Subjects:multinational firms
outsourcing
intra-firm trade
offshoring
vertical FDI
JEL:F12
D23
L23
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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