Cross-regional Variations in Offshore Outsourcing Choices: Evidence from Firm-level Data

Author Name TOMIURA Eiichi  (Faculty Fellow, RIETI) /ITO Banri  (Visiting Scholar, RIETI) /WAKASUGI Ryuhei  (Research Counselor, RIETI)
Creation Date/NO. August 2008 08-E-029
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In offshoring, a firm chooses outsourcing to independent suppliers or in-sourcing from their FDI subsidiaries. This paper empirically examines how the factor intensity is related with the firm’s offshore make-or-buy decision based on the Japanese direct firm-level data of offshoring across all manufacturing industries. This paper confirms that in-sourcing firms tend to be substantially more capital-intensive than outsourcing firms, even if firm size or industry is controlled for. Among the firms offshoring to China compared with North, firms with wider range of capital-labor ratio choose to integrate but relatively capital-intensive firms are active in outsourcing.