The role of design method and process technology in stable outsourcing equilibria

Jin Hyuk Kim, Takehiko Komatsu, Hideo Owan

Research output: Contribution to journalArticlepeer-review

Abstract

We analyze a model of vertical (dis)integration between manufacturing and design in a monopolistically competitive market. Specialized input manufacturers can serve multiple design firms and the manufacturer-designer pairs negotiate a non-binding contract to share input customization cost and production surplus. Hand-collected data on 387 product lines from 118 semiconductor firms are used to predict the firm's decision to outsource manufacturing. We find that, for instance, the use of design tools that facilitate collaboration and process technologies that facilitate learning are both positively associated with outsourcing, consistent with the model's prediction.

Original languageEnglish
Article number102565
JournalInternational Journal of Industrial Organization
Volume69
DOIs
Publication statusPublished - 2020 Mar

Keywords

  • Outsourcing
  • Semiconductor industry
  • Vertical integration

ASJC Scopus subject areas

  • Industrial relations
  • Aerospace Engineering
  • Economics and Econometrics
  • Economics, Econometrics and Finance (miscellaneous)
  • Strategy and Management
  • Industrial and Manufacturing Engineering

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