Ownership and control in outsourcing to China
Subtitle: estimating the property-rights theory of the firm
By: Robert C. Feenstra, Gordon H. Hanson.
Contributors: Hanson, Gordon H.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 10198; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 10198.
Publisher: National Bureau of Economic Research
Published: 2004
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Right of property -- China.; International business enterprises -- China.
Description: "In this paper, we develop a simple model of international outsourcing and apply it to processing trade in China.  We observe China's processing exports broken down by who owns the plant and by who controls the inputs the plant processes.  Multinational firms engaged in export processing in China tend to split factory ownership and input control with managers in China: the most common outcome is to have foreign factory ownership but Chinese control over input purchases.  To account for this organizational arrangement, we appeal to a property-rights model of the firm.  Multinational firms and the Chinese factory managers with whom they contract divide the surplus associated with export processing by Nash bargaining.  Investments in input search, production, and marketing are partially relationship specific.  In our benchmarks estimates, this relationship specificity is lowest in southern coastal provinces, where export markets are thickest, and highest in interior and northern provinces.  The probability contracts are enforced has a similar pattern and is the lowest along the southern coast and the highest in the north"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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