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Market thickness, sunk costs, productivity, and the outsourcing decision: an empirical analysis of manufacturing firms in France

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  • Liza Jabbour

Abstract

This paper presents an empirical analysis of outsourcing behaviour by French manufacturing industries. It focuses on the effects of market thickness, sunk costs, and the productivity of firms on the outsourcing decision. I estimate a dynamic probit model where outsourcing decision is linked to past outsourcing behaviour. The results show that outsourcing is a persistent strategy adopted by large firms and suggest the presence of significant sunk costs associated with outsourcing. The results also show that market thickness reduces search costs and enhances the establishment of outsourcing relationships.

Suggested Citation

  • Liza Jabbour, 2013. "Market thickness, sunk costs, productivity, and the outsourcing decision: an empirical analysis of manufacturing firms in France," Canadian Journal of Economics, Canadian Economics Association, vol. 46(1), pages 103-134, February.
    • Handle: RePEc:cje:issued:v:46:y:2013:i:1:p:103-134
    DOI: 10.1111/caje.12007
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    Cited by:

    1. Ho, Wai-Ming, 2021. "International outsourcing, exchange rates, and monetary policy☆," Journal of International Money and Finance, Elsevier, vol. 118(C).
    2. Denis Ivanov, 2014. "Transition and path-dependence in knowledge-intensive industry location: Case of Russian professional services," ERSA conference papers ersa14p767, European Regional Science Association.

    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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