Trade liberalization and strategic outsourcing

Chen, Yongmin; Ishikawa, Jota; Yu, Zhihao

doi:10.1016/s0022-1996(03)00056-4

Cited by 102 publications

(74 citation statements)

References 15 publications

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“…4 By investing a fixed fee K ≥ 0, firm 1 can acquire the same technology as firm 0 in converting good I into good F . Assume one unit of good I 2 See, e.g., Spiegel (1993), Chen (2001), Shy and Stenbacka (2003), Chen et al (2004), Shy and Stenbacka (2005), Van Long (2005), Buehler and Haucap (2006), Arya et al (2008a,b).…”

Section: The Model and Main Resultsmentioning

confidence: 99%

Strategic sourcing for entry deterrence and tacit collusion

Chen

2010

J. Econ.

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By sourcing key intermediate goods to a potential entrant, incumbent firm can credibly and observably commit to an intense post-entry competition, thereby deter the entrant's entry. At the same time, a tacit collusion exists, and the entrant's loss from staying out of the final-good market is compensated through their sourcing transaction. We find that, there exist scenarios where entry-deterring sourcing enhances not only social welfare but also consumers' welfare, although in general it has ambiguous effect on social welfare.

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Section: The Model and Main Resultsmentioning

confidence: 99%

Strategic sourcing for entry deterrence and tacit collusion

Chen

2010

J. Econ.

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“…They take as their starting point the well-known article by Horn and Wolinsky (1988). Horn and Wolinsky pointed out that unions could benefit (lose) from more fragmented 5 (integrated) production if tasks where compliments (substitutes). Outsourcing typically means to move out some tasks that are complimentary to tasks that will stay in the firm, and the Skaksen-Sørensen result then follows as a variant of the Horn-Wolinsky finding.…”

Section: Introductionmentioning

confidence: 99%

Can deunionization lead to international outsourcing?

Lommerud

Meland

Straume

2009

Journal of International Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We analyze unionized firms' incentives to outsource intermediate goods production to foreign (low-cost) subcontractors. Such outsourcing leads to increased wages for the remaining inhouse production. We find that stronger unions, which imply higher domestic wages, reduce incentives for international outsourcing. Though somewhat surprising, this result provides a theoretical reconciliation of the empirically observed trends of deunionization and increased international outsourcing in many countries. We further show that globalization -interpreted as either market integration or increased product market competition -will increase incentives for international outsourcing. Terms of use: Documents in EconStor mayJEL Code: F16, J51, L24.

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“…Chen et al (2004) present a special case of outsourcing where an oligopolistic domestic firm may buy an intermediate from a more efficient firm that is also its competitor on the final goods market. This type of outsourcing, which facilitates collusion, differs substantially from the one we consider in this paper and highlights a different kind of strategic effect.…”

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confidence: 99%

Economising, Strategising and the Decision to Outsource

Leahy

Montagna

2011

SSRN Journal

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Abstract:We study the make-or-buy decision of oligopolistic firms in an industry in which final good production requires specialised inputs. Firms' mode of operation decision depends on both the incentive to economize on costs and on strategic considerations. We explore the strategic incentives to outsource and show that asymmetric equilibria emerge, with firms choosing different modes of operation, even when they are ex-ante identical. With ex-ante asymmetries, higher cost firms are more likely to outsource. We apply our model to a number of different international trading setups.(86 words)JEL classification: F12, L13, L14.

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Trade liberalization and strategic outsourcing

Cited by 102 publications

References 15 publications

Strategic sourcing for entry deterrence and tacit collusion

Strategic sourcing for entry deterrence and tacit collusion

Can deunionization lead to international outsourcing?

Economising, Strategising and the Decision to Outsource

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