Global Sourcing
Author(s): Pol Antràs and Elhanan Helpman
Source: The Journal of Political Economy, Vol. 112, No. 3 (June 2004), pp. 552-580
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[Journal of Political Economy,2004,vol.112,no.3]᭧2004by The University of Chicago.All rights rerved.0022-3808/2004/11203-0001$10.00Global Sourcing
emba报名Pol Antra `s
Harvard University and National Bureau of Economic Rearch
Elhanan Helpman
Harvard University,Tel Aviv University,and Canadian Institute for Advanced Rearch We prent a North-South model of international trade in which dif-ferentiated products are developed in the North.
Sectors are popu-lated by final-good producers who differ in productivity levels.On the basis of productivity and ctoral characteristics,firms decide whether to integrate into the production of intermediate inputs or outsource them.In either ca they have to decide from which country to source the inputs.Final-good producers and their suppliers must make relationship-specific investments,both in an integrated firm and in an arm’s-length relationship.We describe an equilibrium in which firms with different productivity levels choo different ownership structures and supplier locations.We then study the effects of within-ctoral heterogeneity and variations in industry characteristics on the relative prevalence of the organizational forms.
I.Introduction
A firm that choos to keep the production of an intermediate input within its boundaries can produce it at home or in a foreign country.When it keeps it at home,it engages in standard vertical integration.And when it makes it abroad,it engages in foreign direct investment (FDI)and intrafirm trade.Alternatively,a firm may choo to outsource an input in the home country or in a foreign country.When it buys the Antra `s thanks the Bank of Spain and Helpman thanks the National Science Foundation for financial support.We have received very helpful comments from Gene Grossman,Nancy Stokey,two anonymous referees,and minar participants at various institutions.
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global sourcing553 input at home,it engages in domestic outsourcing.And when it buys it abroad,it engages in foreign outsourcing,or arm’s-length trade.Intel Corporation provides an example of the FDI strategy:it asmbles most of its microchips in wholly owned subsidiaries in China,Costa Rica, Malaysia,and the Philippines.On the other hand,Nike provides an example of the arm’s-length import strategy:it subcontracts most of its manufacturing to independent producers in Thailand,Indonesia,Cam-bodia,and Vietnam.
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Growth of international specialization has been a dominant feature of the international economy.Among the many examples that illustrate this trend,two are particularly telling.Citing Tempest(1996),Feenstra (1998)illustrates Mattel’s global sourcing strategy in the production of its star product,the Barbie doll.“Of the$2export value for the dolls when they leave Hong Kong for the United States,”he writes,“about 35cents covers Chine labor,65cents covers the cost of materials [which are imported from Taiwan,Japan,and the United States],and the remainder covers transportation and overhead,including profits earned in Hong Kong”(p.36).The World Trade Organization provides another example in its1998annual report.In the production of an “American”car,30percent of the car’s value originates in Korea,17.5 percent in Japan,7.5percent in Germany,4percent in Taiwan and Singapore,2.5percent in the United Kingdom,and1.5percent in Irela
nd and Barbados.That is,“only37percent of the production value …is generated in the United States”(p.36).
The increasing international disintegration of production is large enough to be noticed in aggregate statistics.Feenstra and Hanson (1996)u U.S.input-output tables to infer U.S.imports of intermediate inputs.Theyfind that the share of imported intermediates incread from5.3percent of total U.S.intermediate purchas in1972to11.6 percent in1990.Campa and Goldberg(1997)find similar evidence for Canada and the United Kingdom(but not for Japan).And Hummels, Ishii,and Yi(2001)and Yeats(2001)show that international trade has grown faster in components than infinal goods.
But how important is intrafirm relative to arm’s-length trade in in-termediate inputs?Afirm-level data analysis is needed to answer this question,and no such analysis is available at this point in time.And despite the fact that the business press has stresd the spectacular growth of foreign outsourcing,Hanson,Mataloni,and Slaughter(2003) document an equally impressive growth of trade within multinational firms.Nevertheless,the fact that,according to data from the Bureau of Economic Analysis,imports from foreign affiliates of United States–badfirms had fallen from23.9percent of total U.S.imports in1977 to16.1percent in1982,and remained roughly at this level until1999,
英文格言554journal of political economy suggests that the growth of foreign outsourcing by U.S.firms might have outpaced the growth of their foreign intrafirm sourcing.
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Other studies have documented a ri in the prevalence of domestic outsourcing by U.S.firms.The Economist(1991),Bamford(1994),and Abraham and Taylor(1996)all report rising subcontracting in particular industries or activities.A systematic analysis of this trend is not available. Nevertheless,Fan and Lang(2000)provide indirect evidence of a de-cline in vertical integration.According to their data,the average number of four-digit standard industrial classification gments in which a U.S. publicly traded manufacturing company operates declined steadily from 2.72in1979to1.81in1997.This suggests that U.S.manufacturingfirms have become more specialized over time.
To address issues that ari from the choice of outsourcing versus integration and home versus foreign production,we need a theoretical framework in which companies make endogenous organizational choices.We propo such a framework in this paper by integrating two recent strands of the literature.
Melitz(2003)and Helpman,Melitz,and Yeaple(2004)have studied the effects of within-ctoral heterog
值此之际eneity on the decisions offirms to rve foreign markets.By allowing productivity to differ acrossfirms, they show that low-productivityfirms rve only the domestic market, whereas high-productivityfirms also rve foreign markets.Allowing for horizontal foreign direct investment,Helpman et al.also show that, among thefirms that rve foreign markets,the more productive ones engage in foreign direct investment whereas the less productivefirms export,and affiliate sales relative to exports are larger in ctors with more productivity dispersion.Their approach emphasizes variations acrossfirms within industries,without addressing the organizational choices offirms that need to acquire intermediate inputs. Grossman and Helpman(2002)address the choice between out-sourcing and integration in a one-input general equilibrium framework, assuming that allfirms of a given type are equally productive.Their firms face the friction of incomplete contracts in arm’s-length relation-ships,which they weigh against the less efficient production of inputs in integrated companies.As a result,some ctors have only vertically integratedfirms whereas others have only disintegratedfirms.Grossman and Helpman identify ctoral characteristics that lead to one or the other equilibrium structure.This approach has been extended by Antra`s (2003a)to a trading environment,by introducing two new features. First,the friction of incomplete contracts also exists within integrated firms,and—as in Grossman and Hart(1986)—integration provides well-defined property rights.However,the property rights may or may not give integration an advantage over outsourcing.Second,there are two inputs,one controlled by thefinal-good producer and the other by
competition
global sourcing555 another supplier,inside or outside thefirm.The relative intensity of the inputs turns out to be an important determinant of the choice between integration and outsourcing.
By embodying this structure in a Helpman and Krugman(1985)style two-ctor general equilibrium model of trading countries,Antra`s shows that the ctor that is relatively intensive in the input controlled by the final-good producer integrates,whereas the ctor that is relatively in-tensive in the other input outsources.As a result,in the former ctor there is intrafirm trade in inputs,and in the latter ctor there is arm’s-length trade.
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Building on this literature,we develop a theoretical model that com-bines the within-ctoral heterogeneity of Melitz(2003)with the struc-ture offirms in Antra`s(2003a).Thefinal-good producer controls the supply of headquarter rvices,whereas a supplier of intermediate goods controls the quality and quantity of the intermediates.This allows us to study the impact of variations in productivity within ctors and of dif-ferences in technological and organizational characteristics across c-tors on international trade,foreign direct investment,and the organi-zational choices offirms.In this framework,trade,investment,and organization are interdependent.The incentives created by different organizations,differences in theirfixed costs,and wage differentials across countries shape the equilibrium organizational structure.
We show that in a world of two countries,North and South,in which final-good producers are bad in the North,final-good producers that operate in the same ctor but differ by productivity sort into integrated companies that produce inputs in the North(do not engage in foreign trade in inputs),integrated companies that produce inputs in the South (engage in FDI and intrafirm trade),disintegrated companies that out-source in the North(do not engage in foreign trade in inputs),and disintegrated companies that outsource in the South(import inputs at arm’s length).Moreover,we show that in ctors with low headquarter intensity,firms do not integrate;low-productivityfirms outsource in the North whereas high-productivityfirms outsource in the South.In ctors with high headquarter intensity,all four organizational forms may exist in equilibrium,and,as in ctors with low headquarter intensity,high-productivityfirms import inputs whereas low-productivityfirms acquire them in the North.However,among thefirms that acquire inputs in the same country,the low-productivityfirms outsource whereas the high-productivityfirms insource.This implies that the least productivefirms outsource in the North whereas the most productivefirms insource in the South via foreign direct investment.
We u the model to study the relative prevalence of different organ-izational forms.We show how prevalence depends on the wage gap between the North and the South,the trading costs of intermediate
