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International Outsourcing versus FDI under Contractual Incompleteness

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  • Valeria Gattai

Abstract

This paper empirically analyzes the boundaries of a large sample of Italian multinational enterprises, with firm-level data from Capitalia, AIDA and Centrale dei Bilanci. Within the broad array of feasible contracts in a foreign country, we focus on the trade-off between international outsourcing and Foreign Direct Investment (FDI), in a context of contractual incompleteness. Probit estimates reveal that Italian enterprises operating in highly relation-specific environments are more prone to international outsourcing than FDI, consistently with recent theoretical contributions on the topic. Results are robust to different specifications and alternative measures of contractual incompleteness and international outsourcing.

Suggested Citation

  • Valeria Gattai, 2013. "International Outsourcing versus FDI under Contractual Incompleteness," Working Papers 237, University of Milano-Bicocca, Department of Economics, revised Mar 2013.
    • Handle: RePEc:mib:wpaper:237
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    More about this item

    Keywords

    FDI; international outsourcing; contractual incompleteness; Italy;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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