NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

International Outsourcing and Incomplete Contracts

Barbara J. Spencer

NBER Working Paper No. 11418
Issued in June 2005
NBER Program(s):   ITI

International outsourcing to lower cost countries such as China and India can best be understood through the enrichment of trade models to include concepts from industrial organization and contract theory that explain the vertical organization of production. The combination of trade with the choice of organizational form represents an important new area for both theoretical and empirical research. This survey paper provides a perspective on this new literature so as to gain insights into the forces driving international outsourcing. The paper focuses on relationship-specific investment, incomplete contracts, and also search and matching, as fundamental concepts that explain outsourcing decisions.

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Published: Spencer, Barbara J. "International Outsourcing And Incomplete Contracts," Canadian Journal of Economics, 2005, v38(4,Nov), 1107-1135.

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