Foreign direct investments, international outsourcing and subcontracting: The underlying logics

Riad Haddadi and Slimane Merzoug
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Riad Haddadi: University of Bejaia, Algeria
Slimane Merzoug: University of Bejaia, Algeria

IJEP, 2021, vol. 4, issue 3, Pages : 71-88

Abstract: In this paper, we put into perspective international outsourcing and subcontracting, as alternative strategies of firm internationalization. We also identify the trade-offs that allow the firm to choose between integration or outsourcing. Our main results show that if asset ownership is separable without the risk of losing its competitive advantage, the firm should opt for outsourcing through international subcontracting, provided that the transaction costs are lower than the control costs of a foreign subsidiary. Dans cet article, nous mettons en perspective l'externalisation et la sous-traitance internationales, en tant que stratégies alternatives d'internationalisation de la firme. Nous identifions également les arbitrages qui permettent à la firme de choisir entre l'intégration ou l'externalisation. Nos principaux résultats montrent que si la propriété des actifs est séparable sans risque de perdre son avantage concurrentiel, la firme doit opter pour l’externalisation via la sous-traitance internationale, à condition que les coûts de transaction soient inférieurs aux coûts de contrôle d'une filiale à l'étranger.

Keywords: Foreign direct investment; Outsourcing; Subcontracting; Production fragmentation; Investissement direct étranger; Externalisation; Sous-traitance; Fragmentation de la production (search for similar items in EconPapers)
Date: 2021
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