Organizing Global Supply Chains: Input Cost Shares and Vertical Integration

Item Type	Monograph (Discussion Paper)
Abstract	We study whether and how the technological importance of an input – measured by its cost share – is related to the decision of whether to “make” or “buy” that input. Using detailed French international trade data and an instrumental variable approach based on self-constructed IO tables, we show that French multinationals vertically integrate those inputs that have high cost shares. A stylized incomplete contracting model with both ex ante and ex post inefficiencies explains why: technologically more important inputs are “made” when transaction cost economics type forces (TCE; favoring integration) overpower property rights type forces (PRT; favoring outsourcing). Additional results related to the contracting environment and headquarters intensity consistent with our theoretical framework show that both TCE and PRT type forces are needed to fully explain the empirical patterns in the data.
Authors	Berlingieri, Giuseppe; Pisch, Frank & Steinwender, Claudia
Journal or Publication Title	HSG Discussion Papers
Language	English
Subjects	economics
HSG Classification	contribution to scientific community
HSG Profile Area	SEPS - Economic Policy
Date	November 2018
Publisher	University of St. Gallen
Place of Publication	St. Gallen
Series Name	Discussion Papers
Number	1815
Number of Pages	61
Official URL	http://ux-tauri.unisg.ch/RePEc/usg/econwp/EWP-1815...
Contact Email Address	frank.pisch@unisg.ch
Depositing User	Prof. PhD Frank Pisch
Date Deposited	21 Nov 2018 09:38
Last Modified	03 Feb 2023 01:25
URI:	https://www.alexandria.unisg.ch/publications/255820

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Berlingieri, Giuseppe; Pisch, Frank & Steinwender, Claudia: Organizing Global Supply Chains: Input Cost Shares and Vertical Integration. Discussion Papers, Nr. 1815 : University of St. Gallen, 2018,

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https://www.alexandria.unisg.ch/id/eprint/255820

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