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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