Pitfalls in private and social incentives of vertical crossborder outsourcing

Rossini, Gianpaolo (2005) Pitfalls in private and social incentives of vertical crossborder outsourcing. p. 35. DOI 10.6092/unibo/amsacta/1760.
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Vertical production processes take increasingly place in a crossborder fashion with two distinct patterns. Either a multinational firm (MNF) controls the whole vertical chain spreading production over many countries or vertically separeted firms, belonging to different countries, operate independently in distinct stages. Which arrangement emerges is a matter of incentives. On the private side, the decrease of transport costs may expand crossborder outsourcing, due to the incentives to disintegrate that emerge alternatively for the Upstream and the Downstream sections of production. Even though there remains a social superiority of vertical integration (V I) this becomes questionable since the benefits are spread over more than one country, and some country may rather like a vertically disintegrated (VD) arrangement, which is often more trade oriented. Finally, we consider an international duopoly with a vertical restraint, coming either from a competition or a trade policy. Additional private incentives to go VD; due to some fresh drawbacks of V I; arise and countries may show distinct patterns of V I according to their relative size.

Document type
Monograph (Working Paper)
Rossini, Gianpaolo
vertical integration, outsourcing, trade, R&D, differentiation
Deposit date
16 Feb 2006
Last modified
17 Feb 2016 14:39

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