Globalisation strategy: foreign direct investment or international outsourcing trade?

Chu-Ping Lo and Guang-Jong Fann

International Journal of Management and Enterprise Development, 2010, vol. 9, issue 2, 147-157

Abstract: In Antras and Helpman's (2004) model, the most productive firms prefer foreign direct investment (FDI) to international outsourcing in their globalisation strategy. This paper adds Griliches's production function to Antras and Helpman's (2004) model in order to determine how an endogenalized headquarter services reshape firms' global organisational structures. We argue that while an intensive headquarter services help reduce incomplete contract distortion, the most productive firms with a sufficiently high headquarter service intensity may prefer international outsourcing to FDI.

Keywords: international outsourcing; FDI; foreign direct investment; FDI; HQ services; headquarters services; globalisation strategies; production functions; Zvi Griliches; Pol Antras; Elhanan Helpman; endogenalised headquarters; reshaping; global structures; organisational structure; contract distortion; productivity; service intensity. (search for similar items in EconPapers)
Date: 2010
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