Input specificity and global sourcing

Ari Van Assche and Galina A. Schwartz

Journal of the Japanese and International Economies, 2010, vol. 24, issue 1, 69-85

Abstract: This paper identifies a new industry-equilibrium channel through which a firm's productivity affects its organizational choice. In a two-country model with firm heterogeneity and incomplete contracts, we show that the degree of input specificity and the hold-up friction in an outsourcing relation become a function of the final good firm's productivity when inputs are not completely specific. We examine the implications for the equilibrium international sorting pattern of firms.

Keywords: Firm; heterogeneity; Input; specificity; Hold-up; problem; Incomplete; contracts (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jjieco:v:24:y:2010:i:1:p:69-85

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