Title: Entry costs and outsourcing decisions: evidence from the U.S. overseas assembly provision
Abstract: This paper studies the decision to participate in outsourcing through the U.S. overseas assembly provision or OAP. When the program is observed at the country–industry level of detail, one notable element is the high degree of persistence in production decisions. To capture this feature, a model of outsourcing decisions in the presence of sunk entry costs is proposed and tested. The results show that country costs influence firms’ OAP production decisions. However, production persistence arises in a fashion that is consistent with sunk entry costs that temper firm responses to cost changes. The phenomenon and its connection to industry capital intensity are explored.
Publication Year: 2004
Publication Date: 2004-12-01
Language: en
Type: article
Indexed In: ['crossref']
Access and Citation
Cited By Count: 28
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