Contractual Versus Generic Outsourcing: The Role of Proximity

Robert C. Feenstra · Barbara J. Spencer

33 citations0/0 files storedNational Bureau of Economic Research

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Global trade and economics International Business and FDI Outsourcing and Supply Chain Management

Abstract

We explore the relationship between proximity of buyers and sellers and the organizational form of outsourcing.Outsourcing can be "contractual" in which suppliers undertake specific investments or involve "generic" market transactions.Proximity expands the variety of products sourced through contracts abroad rather than at home, but the range of generic imports is unchanged.A higher-quality foreign workforce raises the variety of contractual trade, but at the expense of generics.We confirm these predictions using data for ordinary versus processing exports from Chinese provinces to destination markets and also the predictions of an extended model that allows for multinational production.

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References

1986The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration 1997Formal and Real Authority in Organizations 1994The Firm as an Incentive System 1994New product varieties and the measurement of international prices 2003Firms, Contracts, and Trade Structure 2002Integration versus Outsourcing in Industry Equilibrium 2004Outsourcing in a Global Economy 2006Trade, FDI, and the Organization of Firms

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2008Foreign versus domestic outsourcing: Firm-level evidence on the role of technology 2009Just-in-Time Manufacturing Systems, Subcontracting and Geographic Proximity 2010Outsourcing Versus Integration at Home or Abroad 2007Please Pass the Catch-up The Relative Performance of Chinese and Foreign Firms in Chinese Exports 2009Input specificity and global sourcing

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