Journal of the Japanese and International Economies vol:24 issue:1 pages:69-85
This paper identifies a new industry-equilibrium channel through
which a firm’s productivity affects its organizational choice. In a
two-country model with firm heterogeneity and incomplete contracts,
we show that the degree of input specificity and the holdup
friction in an outsourcing relation become a function of the final
good firm’s productivity when inputs are not completely specific.
We examine the implications for the equilibrium international
sorting pattern of firms. J. Japanese Int. Economies 24 (1) (2010)
69–85. HEC Montréal, Department of International Business,
3000 Chemin de la Côte-Sainte-Catherine, Montréal, Québec,
H3T-2A7 Canada; University of California, Berkeley, Department
of Electrical Engineering and Computer Sciences, 253 Cory Hall,
Berkeley, California 94720, United States.