文档介绍：Princeton
University
Outsourcing versus FDI in Industry Equilibrium
by
Gene M. Gr ossman
Princeton University
50and
Elhanan Help man
Harvard University, Tel Aviv University, and CIAR
Discussion Paper #219
December 2002
Discussion Papers in Economics
Woodrow Wilson School
of Public and International Affairs
Outsourcing versus FDI in Industry Equilibrium∗
by
Gene M. Grossman
Princeton University
and
Elhanan Helpman
Harvard University, Tel Aviv University, and CIAR
December 2002
Abstract
We study the determinants of the extent of outsourcing and of direct
foreign investment in an industry in which producers need -
ponents. Potential suppliers must make a relationship-specificinvestment
in order to serve each prospective customer. Such investments are governed
by imperfect contracts. A final-good producer can ponents
for itself, but the per-unit cost is higher than for specialized suppliers. We
consider how the size of the cost differential, the extent of contractual in-
completeness,thesizeoftheindustry,andtherelativewagerateaffect the
organization of industry production.
JEL Classification: F12, F23, L22, D23
Keywords: outsourcing, direct foreign investment, multinational cor-
porations, imperfect contracting, intra-industry trade
∗We thank the National Science Foundation for financial support.
1 Introduction
International outsourcing and FDI (foreign direct investment) have been growing
around the globe. Firms outsource an expanding range of activities, such as the
production of intermediate inputs and after-sale services. Audet (1996), Campa and
Goldberg (1997), Feenstra (1998), Hummels et al. (2001) and Yeats (2001) have doc-
umented this phenomenon. Firms also expand foreign direct investment. Although
the debate on whether most FDI is horizontal or vertical has not been settled, it is
evident that the production of inputs is an important activity