Production to Order and Performance in Domestic and Foreign Markets

Tiziano Razzolini () and Davide Vannoni

L'industria, 2009, issue 3, 437-466

Abstract: This paper contributes to the literature on firms' productivity and exporting decisions by analyzing the role played by organizational choice aspects. Rather than setting up a vertically integrated structure, manufacturers may act as sub-contractors in both domestic and foreign markets, and produce to satisfy the requirements of other firms. The predictions that the most productive firms self-select into exporting, while the least productive ones work as sub-contractors serving the domestic market only are tested on a sample of Italian firms observed in the 1998-2003 period. The results of our estimates highlight a ranking of firms consistent with the prediction of a "stylized" theoretical model, and provide a clear indication that firms using sub-contracting in foreign markets display lower TFP values as compared to "direct exporters".

Keywords: Export; Sub-contracting; Production to Order; Total Factor Productivity (search for similar items in EconPapers)
Date: 2009
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