Centre for Vocational Education Research LSE RSS Email Facebook Twitter


CEP discussion paper
Productivity and the Sourcing Modes of Multinational Firms: Evidence from French Firm-Level Data
Fabrice Defever and Farid Toubal December 2007
Paper No' CEPDP0842:
Full Paper (pdf)

JEL Classification: F23; F14; L22; L23

Tags: productivity; incomplete contracts; intra-firm trade; outsourcing

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.