Headquarter intensity and the choice between outsourcing versus integration at home or abroad

Abstract

This article provides an empirical analysis of the choice between outsourcing and integration, with a distinction based on whether production is carried out at home or abroad. Using firm-level data for Italy, we find that the preference for integration over outsourcing is positively related to indicators of headquarter intensity, notably capital intensity, and to firm-level productivity. We also find that foreign sourcing strategies are not independent from domestic sourcing strategies. Overall, the evidence provides support to models based on relationship-specific investments.

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