Globalisation strategy: foreign direct investment or international outsourcing trade?
by Chu-Ping Lo, Guang-Jong Fann
International Journal of Management and Enterprise Development (IJMED), Vol. 9, No. 2, 2010

Abstract: In Antras and Helpman's (2004) model, the most productive firms prefer foreign direct investment (FDI) to international outsourcing in their globalisation strategy. This paper adds Griliches's production function to Antras and Helpman's (2004) model in order to determine how an endogenalized headquarter services reshape firms' global organisational structures. We argue that while an intensive headquarter services help reduce incomplete contract distortion, the most productive firms with a sufficiently high headquarter service intensity may prefer international outsourcing to FDI.

Online publication date: Fri, 22-Oct-2010

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