STRATEGIC OUTSOURCING UNDER ECONOMIES OF SCALE

In: Bulletin of economic research, Band 67, Heft 2, S. 134-145

Abstract

ABSTRACTWe show that economies of scale in upstream production can lead both the disintegrated downstream firm as well as its vertically integrated rival to outsource offshore for intermediate goods, even if offshore production has a moderate cost disadvantage compared to in‐house production of the vertically integrated firm.