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Productivity and the sourcing modes of multinational firms: evidence from French firm-level data

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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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en

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application/pdf

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http://eprints.lse.ac.uk/19655/1/Productivity_and_the_Sourcing_Modes_of_Multinational_Firms_Evidence_from_French_Firm-Level_Data.pdf

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