Defever, Fabrice and Toubal, Farid (2007) Productivity and the sourcing modes of multinational firms: evidence from French firm-level data. CEPDP, 842. Centre for Economic Performance, London School of Economics and Political Science, London, UK. ISBN 9780853282174
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We investigate the role of a firm’s total factor productivity in its decision to import from their affiliates rather than from independent input suppliers. We propose a slightly modified version of the Antràs and Helpman (2004) model. We assume higher fixed costs under outsourcing and a firm-specific production function. We use detailed French firm-level data that provides a geographical breakdown of French firms’ import at product level and their sourcing modes in 1999. We find strong empirical support for the theoretical predictions of the model. In particular, high-productivity firms that have a production process intensive in suppliers’ inputs source their inputs through independent foreign suppliers.
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