A model of outsourcing and foreign direct investment
Stähler, Frank
Cite this item:
Stähler, F. (2005). A model of outsourcing and foreign direct investment (Economics Discussion Papers Series No. 516). University of Otago. Retrieved from http://hdl.handle.net/10523/859
Permanent link to OUR Archive version:
http://hdl.handle.net/10523/859
Abstract:
This paper presents a model in which two firms may use foreign direct investment or outsourcing in order to reduce the production cost of an intermediate input. Outsourcing requires training which is costly and creates a positive spillover. The paper shows that the equilibrium depends on the level of training costs. If they are high, only bilateral outsourcing is possible in equilibrium. If bilateral outsourcing is incomplete, it will not change prices compared to no outsourcing. If they are low, only complete outsourcing is possible. If complete outsourcing is unilateral (bilateral), the price increases (decreases) with the degree of spillovers.
Date:
2005-12
Publisher:
University of Otago
Pages:
20
Series number:
516
Keywords:
outsourcing; Foreign direct investment
Research Type:
Discussion Paper
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