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Input specificity and global sourcing

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  • Van Assche, Ari
  • Schwartz, Galina A.

Abstract

This paper identifies a new industry-equilibrium channel through which a firm's productivity affects its organizational choice. In a two-country model with firm heterogeneity and incomplete contracts, we show that the degree of input specificity and the hold-up friction in an outsourcing relation become a function of the final good firm's productivity when inputs are not completely specific. We examine the implications for the equilibrium international sorting pattern of firms.

Suggested Citation

  • Van Assche, Ari & Schwartz, Galina A., 2010. "Input specificity and global sourcing," Journal of the Japanese and International Economies, Elsevier, vol. 24(1), pages 69-85, March.
    • Handle: RePEc:eee:jjieco:v:24:y:2010:i:1:p:69-85
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    References listed on IDEAS

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    Cited by:

    1. Sasan Bakhtiari, 2015. "Productivity, outsourcing and exit: the case of Australian manufacturing," Small Business Economics, Springer, vol. 44(2), pages 425-447, February.

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