English, Article edition: Outsourcing vs FDI in Oligopoly Equilibrium Dermot Leahy; Catia Montagna

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  • article
Language
  • English

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Title
  • Outsourcing vs FDI in Oligopoly Equilibrium
Author
  • Dermot Leahy
  • Catia Montagna
Physical Description
  • article
Notes
  • We consider the make-or-buy decision of oligopolistic firms in an industry in which final good production requires specialized inputs. Factor price considerations dictate that firms acquire the intermediate abroad, by either producing it in a wholly owned subsidiary or outsourcing it to a supplier who must make a relationship-specific investment. Firms' internationalization mode depends on cost and strategic considerations. Crucially, asymmetric equilibria emerge, with firms choosing different modes of internationalization, even when they are ex ante identical. With ex ante asymmetries, lower cost producers have a stronger incentive to vertically integrate (FDI), while higher cost firms are more likely to outsource. Externalisation contre FDI (Foreign Direct Investment) en equilibre oligopolistique Resume Cet article concerne la decision de fabriquer ou d'acheter des entreprises oligopolistiques dans une industrie dans laquelle la bonne production finale necessite des intrants specialises. Les considerations de cout du facteur de production obligent les entreprises a acquerir les intermediaires a l'etranger, soit par leur production dans une filiale en propriete exclusive, soit par externalisation vers un fournisseur qui doit faire un investissement specifique a la relation. Le mode d'internationalisation des entreprises depend de considerations de cout et de strategie. Des equilibres asymetriques emergent de maniere critique, les entreprises choisissant differents modes d'internationalisation meme lorsqu'elles sont ex ante identiques. Avec des asymetries ex ante, les producteurs a faible cout tendent plus facilement vers l'integration verticale (FDI), tandis que les entreprises a cout eleve tendent plutot vers la pratique de l'externalisation. Subcontratacion versus inversion extranjera directa (IED [FDI]) en el equilibrio de un oligopolio Resumen Analizamos la decision de manufactura o compra en companias oligopolisticas en una industria en donde la produccion final de bienes requiere entradas especializadas. Consideraciones sobre el factor precio hacen que las firmas adquieran el intermedio en el extranjero, ya sea elaborandolo en un subsidiario 100% suyo o subcontratandolo a un proveedor quien debe realizar una inversion en base a una relacion especifica. El modo de internalizacion de las firmas depende de consideraciones de coste y estrategicas. De forma crucial, equilibrios asimetricos emergen, con firmas eligiendo diferentes modos de internalizacion, incluso cuando son identicas ex ante. Con asimetrias ex ante, los productores de bajo coste tienen un incentivo mayor para integrarse verticalmente (IED [FDI]), mientras que es mas probable que las firmas de alto coste usen la subcontratacion. [image omitted]
  • Outsourcing, foreign direct investment, trade liberalization, oligopoly,
  • RePEc:taf:specan:v:4:y:2009:i:2:p:149-166
Language
  • English
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