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dc.contributor.authorNowak, Verenaen_US
dc.contributor.authorSchwarz, Christianen_US
dc.contributor.authorSuedekum, Jensen_US
dc.description.abstractRecent studies indicate that firms often outsource standard and simple tasks, while keeping complex and important inputs inside their boundaries. This observation is difficult to reconcile with the property rights approach of the firm, which suggests that important components should be outsourced in order to properly incentivize the respective suppliers. In this paper we introduce economies of scope into a property rights model where a producer contracts with two suppliers. The organizational decision is driven by two countervailing effects: the ownership rights effect favors outsourcing, while the indirect effect via the suppliers' costs favors vertical integration of both inputs. If production is highly component-intensive, and if one input is much more important than the other, we show that vertical integration of the more important and outsourcing of the less important supplier is chosen in equilibrium. We also consider an open economy setup where the producer decides whether to offshore inputs.en_US
dc.publisherCenter for Economic Studies and Ifo Institute (CESifo) Munichen_US
dc.relation.ispartofseriesCESifo working paper: Industrial Organisation 3823en_US
dc.subject.keywordmultinational firmsen_US
dc.subject.keywordintra-firm tradeen_US
dc.subject.keywordproperty rights approachen_US
dc.subject.stwMultinationales Unternehmenen_US
dc.subject.stwVertikale Konzentrationen_US
dc.subject.stwFirmeninterner Handelen_US
dc.titleOn the organizational structure of multinational firms: Which sourcing mode for which Input?en_US
dc.typeWorking Paperen_US
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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