Multi-sourcing as an entry deterrence strategy

Arijit Mukherjee and Yingyi Tsai

International Review of Economics & Finance, 2013, vol. 25, issue C, 108-112

Abstract: This paper studies the rationale for multiple sourcing. In a simple model of outsourcing that embodies technology transfer and the threat of competition from the supplier(s) due to imitation, we show that multiple sourcing helps to deter entry by the suppliers into the final goods market and enhances profitability of the outsourcing firm. Our explanation for multiple outsourcing differs from the standard arguments, which either reduce the double marginalization problem or eliminate supply bottlenecks.

Keywords: Entry; Imitation; Multiple sourcing; Vertical technology transfer (search for similar items in EconPapers)
JEL-codes: F12 F23 L13 L24 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:25:y:2013:i:c:p:108-112

DOI: 10.1016/j.iref.2012.04.003

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