The role of overseas Chinese-speaking regions in global sourcing

Chu-Ping Lo, Shih-Jye Wu and Su-Ying Hsu

China Economic Review, 2014, vol. 30, issue C, 133-142

Abstract: Why do many of the world's most productive firms prefer global outsourcing to FDI? To address this issue, this paper introduces an intermediate-good producer to Antràs and Helpman's (2004) North–South model, where the Northern firms can employ the producer via an outsourcing contract and have the producer engage in FDI in the South. This strategy could substantially reduce both the incomplete contract distortion and the associated tailoring cost if the intermediate-good producer shares ethnic heritage with the South. Then, the most productive firms, not only in the consumer electronics but also the labor-intensive industries, overwhelmingly apply this strategy rather than FDI.

Keywords: International outsourcing; Incomplete contract; China (search for similar items in EconPapers)
JEL-codes: F12 F13 F14 F23 O33 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:30:y:2014:i:c:p:133-142

DOI: 10.1016/j.chieco.2014.05.018

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