Market thickness, sunk costs, productivity, and the outsourcing decision: an empirical analysis of manufacturing firms in France
In: The Canadian journal of economics: the journal of the Canadian Economics Association = Revue canadienne d'économique, Band 46, Heft 1, S. 103-134
ISSN: 1540-5982
Abstract This paper presents an empirical analysis of outsourcing behaviour by French manufacturing industries. It focuses on the effects of market thickness, sunk costs, and the productivity of firms on the outsourcing decision. I estimate a dynamic probit model where outsourcing decision is linked to past outsourcing behaviour. The results show that outsourcing is a persistent strategy adopted by large firms and suggest the presence of significant sunk costs associated with outsourcing. The results also show that market thickness reduces search costs and enhances the establishment of outsourcing relationships.