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Internalizing Global Value Chains: A Firm-Level Analysis

Laura Alfaro (), Pol Antras, Davin Chor () and Paola Conconi ()

No ECARES 2015-29, Working Papers ECARES from ULB -- Universite Libre de Bruxelles

Abstract: In recent decades, technological progress in information and communication technology andfalling trade barriers have led firms to retain within their boundaries and in their domesticeconomies only a subset of their production stages. A key decision facing firms worldwide is theextent of control to exert over the di↵erent segments of their production processes. Building onAntr`as and Chor (2013), we describe a property-rights model of firm boundary choices alongthe value chain. To assess the evidence, we construct firm-level measures of the upstreamness ofintegrated and non-integrated inputs by combining information on the production activities offirms operating in more than 100 countries with Input-Output tables. In line with the model’spredictions, we find that whether a firm integrates upstream or downstream suppliers dependscrucially on the elasticity of demand for its final product. Moreover, a firm’s propensity tointegrate a given stage of the value chain is shaped by the relative contractibility of the stageslocated upstream versus downstream from that stage. Our results suggests that contractualfrictions play an important role in shaping the integration choices of firms around the world.

Keywords: global value chains; sequential production; incomplete contracts (search for similar items in EconPapers)
JEL-codes: F14 F23 D23 L20 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cse, nep-cta, nep-int and nep-tid
Date: 2015-09
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Related works:
Journal Article: Internalizing Global Value Chains: A Firm-Level Analysis (2019) Downloads
Working Paper: Internalizing Global Value Chains: A Firm-Level Analysis (2018)
Working Paper: Internalizing Global Value Chains: A Firm-Level Analysis (2017) Downloads
Working Paper: Internalizing global value chains: a firm-level analysis (2017) Downloads
Working Paper: Internalizing Global Value Chains: A Firm-Level Analysis (2015) Downloads
Working Paper: Internalizing Global Value Chains: A Firm-Level Analysis (2015) Downloads
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