Global Sourcing of Complex Production Processes

Christian Schwarz () and Jens Suedekum
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Christian Schwarz: University of Duisburg-Essen

No 5305, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We develop a theory of a firm in an environment with incomplete contracts. The firm’s headquarter decides on the complexity, the organization, and the global scale of its production process. Specifically, it decides: i) on the mass of symmetric intermediate inputs that are part of the value chain, ii) if the supplier of each component is an external contractor or an integrated affiliate, and iii) if the supplier is offshored to a foreign low-wage country. Afterwards we consider a related scenario where the headquarter contracts with a given number of two asymmetric suppliers. Our model is consistent with several stylized facts from the recent literature that existing theories of multinational firms cannot account for.

Keywords: intra-firm trade; vertical FDI; outsourcing; multinational firms; offshoring (search for similar items in EconPapers)
JEL-codes: D23 F12 L23 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2010-11
New Economics Papers: this item is included in nep-bec and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published - revised version published in: Journal of International Economics, 2014, 93 (1), 123-139

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Related works:
Journal Article: Global sourcing of complex production processes (2014)
Working Paper: Global sourcing of complex production processes (2013)
Working Paper: Global Sourcing of Complex Production Processes (2011)
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