Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/242389 
Year of Publication: 
2021
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2021: Climate Economics
Publisher: 
ZBW - Leibniz Information Centre for Economics, Kiel, Hamburg
Abstract: 
I analyse firms organisational choices when they face uncertainty about institutional conditions in foreign locations with heterogeneous final good producers and incomplete contracts. As firms learn about the conditions abroad, the increasing offshoring activity increases competition in the final goods market, leading to a progressive vertical disintegration of the supply chains. Initially, the firms that decide to explore offshoring potential choose integration. As competition in final good markets intensifies, the least productive ones among them switch sequentially to arm's length trade. In the fully domestic supply chains, the increasing competition promotes a sequential disintegration of the domestic intermediate input suppliers. I test for the predictions of the model using sectorallevel data for the US manufacturing sectors.
Subjects: 
Firm theory
multinational firms
incomplete contracts
global sourcing
uncertainty
sequential offshoring
information externalities
learning
competition
outsourcing
forward and backward integration
FDI
JEL: 
D21
D23
D81
D83
F14
F21
F23
L22
Document Type: 
Conference Paper

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