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Discussion Paper Details

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Title: Productivity, Relationship-Specific Inputs and the Sourcing Modes of Multinationals

Author(s): Fabrice Defever and Farid Toubal

Publication Date: November 2011

Keyword(s): incomplete contracts, intra-group trade, outsourcing and productivity

Programme Area(s): International Trade and Regional Economics

Abstract: We investigate the roles of productivity and the specificity of inputs for the international sourcing strategy of firms which are part of a multinational network. We present a framework in which firms decide to import from a foreign independent supplier or from their related party abroad according to these two dimensions. We use a detailed survey that provides a detailed geographical breakdown of French firms' imports at the product level as well as the sourcing mode used for each transaction. The dataset also provides information to estimate the firms' productivity and their intensity in relationship-specific inputs. After controlling for countries of origin, products and sectors specific effects, the empirical results provide evidence that for the most productive multinationals the likelihood of trading through an independent supplier is higher especially if they use relationship-specific inputs intensively.

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Bibliographic Reference

Defever, F and Toubal, F. 2011. 'Productivity, Relationship-Specific Inputs and the Sourcing Modes of Multinationals'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=8656