We present a North South model of international trade in which differentiated products are developed in the North. Sectors are populated by final-good producers who differ in productivity levels. Based on productivity and sectoral characteristics, firms decide whether to integrate into the production of intermediate inputs or outsource them. In either case they have to decide from which country to source the inputs. Final-good producers and their suppliers must make relationship-specific investments, both in an integrated firm and in an arm's-length relationship. We describe an equilibrium in which firms with different productivity levels choose different ownership structures and supplier locations, i.e., they choose different organizational forms. We then study the effects of within-sectoral heterogeneity and variations in industry characteristics on the relative prevalence of these organizational forms. The analysis sheds light on the structure of foreign trade within and across industries.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
10082.
Length: Date of creation: Nov 2003 Date of revision: Handle: RePEc:nbr:nberwo:10082
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Find related papers by JEL classification: D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Robert E. Lipsey & Magnus Blomstrom & Eric D. Ramstetter, 1998.
"Internationalized Production in World Output,"
NBER Chapters,
in: Geography and Ownership as Bases for Economic Accounting, pages 83-138
National Bureau of Economic Research, Inc.
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Dalia Marin & Thierry Verdier, 2004.
"Globalization and the Empowerment of Talent,"
Discussion Papers
1, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
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