Organizing Global Supply Chains: Input-Output Linkages and Vertical Integration
Name
SSRN-id3290421.pdf
Description
Accepted version
Size
557.36 KB
Format
Adobe PDF
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4cd2250edb912a2afe122da44d66410e
Author(s)
Berlingieri, Giuseppe
Pisch, Frank
Steinwender, Claudia
Date Issued
2021
Journal
Journal of the European Economic Association
Publisher
Oxford University Press (OUP)
Version
Author's final manuscript
Abstract
Abstract
We study how the technological importance of inputs—measured by cost shares—is related to the decision to “make” or “buy” that input. Using detailed French international trade data and an instrumental variable approach based on self-constructed input–output tables, we show that multinationals vertically integrate technologically important inputs. 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 overpower property rights type forces. However, additional results show that both types of forces are needed to explain the full patterns in the data.
We study how the technological importance of inputs—measured by cost shares—is related to the decision to “make” or “buy” that input. Using detailed French international trade data and an instrumental variable approach based on self-constructed input–output tables, we show that multinationals vertically integrate technologically important inputs. 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 overpower property rights type forces. However, additional results show that both types of forces are needed to explain the full patterns in the data.
MIT Department
Massachusetts Institute of Technology. Department of Economics
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Creative Commons Attribution-Noncommercial-Share Alike
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DOI of Published Version
https://doi.org/10.1093/JEEA/JVAA039
