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STRATEGIC OUTSOURCING UNDER ECONOMIES OF SCALE
Author(s) -
Chen Yutian,
Sen Debapriya
Publication year - 2015
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/j.1467-8586.2012.00467.x
Subject(s) - outsourcing , economies of scale , industrial organization , production (economics) , vertical integration , upstream (networking) , offshoring , downstream (manufacturing) , scale (ratio) , economics , business , submarine pipeline , commerce , offshore outsourcing , microeconomics , operations management , marketing , engineering , telecommunications , physics , geotechnical engineering , quantum mechanics
We show that economies of scale in upstream production can lead both the disintegrated downstream firm as well as its vertically integrated rival to outsource offshore for intermediate goods, even if offshore production has a moderate cost disadvantage compared to in‐house production of the vertically integrated firm.