The role of design method and process technology in stable outsourcing equilibria

Jin-Hyuk Kim, Takehiko Komatsu and Hideo Owan

International Journal of Industrial Organization, 2020, vol. 69, issue C

Abstract: We analyze a model of vertical (dis)integration between manufacturing and design in a monopolistically competitive market. Specialized input manufacturers can serve multiple design firms and the manufacturer-designer pairs negotiate a non-binding contract to share input customization cost and production surplus. Hand-collected data on 387 product lines from 118 semiconductor firms are used to predict the firm’s decision to outsource manufacturing. We find that, for instance, the use of design tools that facilitate collaboration and process technologies that facilitate learning are both positively associated with outsourcing, consistent with the model’s prediction.

Keywords: Outsourcing; Vertical integration; Semiconductor industry (search for similar items in EconPapers)
JEL-codes: L23 L63 M20 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:69:y:2020:i:c:s0167718719300931

DOI: 10.1016/j.ijindorg.2019.102565

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