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Global Sourcing Decisions and Firm Productivity: Evidence from Spain

By Wilhelm Kohler and Marcel Smolka

Abstract

We investigate the link between productivity of firms and their sourcing behavior. Following Antràs & Helpman (2004) we distinguish between domestic and foreign sourcing, as well as between outsourcing and vertical integration. A firm’s choice is driven by a hold-up problem caused by lack of enforceable contracts. We use Spanish firm-level data to examine the productivity premia associated with the different sourcing strategies. We find strong empirical support for the predictions of the model.productivity, outsourcing, intra-firm trade, foreign direct investment, incomplete contracts, firm-level data

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