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The role of design method and process technology in stable outsourcing equilibria

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  • Kim, Jin-Hyuk
  • Komatsu, Takehiko
  • Owan, Hideo

Abstract

We analyze a model of vertical (dis)integration between manufacturing and design in a monopolistically competitive market. Specialized input manufacturers can serve multiple design firms and the manufacturer-designer pairs negotiate a non-binding contract to share input customization cost and production surplus. Hand-collected data on 387 product lines from 118 semiconductor firms are used to predict the firm’s decision to outsource manufacturing. We find that, for instance, the use of design tools that facilitate collaboration and process technologies that facilitate learning are both positively associated with outsourcing, consistent with the model’s prediction.

Suggested Citation

  • Kim, Jin-Hyuk & Komatsu, Takehiko & Owan, Hideo, 2020. "The role of design method and process technology in stable outsourcing equilibria," International Journal of Industrial Organization, Elsevier, vol. 69(C).
    • Handle: RePEc:eee:indorg:v:69:y:2020:i:c:s0167718719300931
    DOI: 10.1016/j.ijindorg.2019.102565
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    More about this item

    Keywords

    Outsourcing; Vertical integration; Semiconductor industry;
    All these keywords.

    JEL classification:

    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L63 - Industrial Organization - - Industry Studies: Manufacturing - - - Microelectronics; Computers; Communications Equipment
    • M20 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - General

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