Vertical integration and supplier finance

Erasmus Kersting () and Holger Görg

No 1894, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: We investigate the financial implications of a multinational firm's choice between outsourcing and integration from the perspective of the supplier. Using a simple model, we explore the extent to which an integrated supplier's access to finance, as well as its sources of funding, change relative to a firm supplying a multinational at arm's-length. The model predicts that integrated firms have better access to finance and cover a larger share of their costs using internal funds. Furthermore, improvements in a host country's level of financial development have less of an impact on the financial situation of integrated suppliers. We present empirical evidence from firm-level data for over 60 countries broadly supporting the predictions.

Keywords: Vertical Integration; Financial Constraints; Multinational companies (search for similar items in EconPapers)
JEL-codes: F23 G32 (search for similar items in EconPapers)
Date: 2014
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Related works:
Journal Article: Vertical integration and supplier finance (2017)
Journal Article: Vertical integration and supplier finance (2017)
Working Paper: Vertical integration and supplier finance (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1894

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