SMU SOE Seminar (October 28, 2022): Contracting with Enemies?: Vertical FDI with Outsourcing Contracts

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ABSTRACT An exploration of Korean MNCs' foreign affiliate-level data reveals that a significant portion of manufacturing foreign affiliates sell both to related and unrelated firms at the same time. We refer to this as hybrid vertical FDI. We rationalize the presence of hybrid vertical FDI by modifying the otherwise standard property-rights model of global sourcing with the subsidiary-level option of supplying inputs to unrelated customers in addition to related firms. Given the positive production externality from serving additional customers (that is proportional to the MNC's productivity) and the costs of getting such benefit (that are increasing in relationship-specificity of the outsourced inputs), the model generates testable hypotheses that are robustly confirmed by our subsequent empirical analysis. Click here to view the CV. Click here to view the paper.
		PRESENTER Jee-Hyeong Park Seoul National University
		RESEARCH FIELDS International Trade Trade Policy
		DATE: 28 October 2022 (Friday)
		TIME: 4pm - 5.30pm
		VENUE: Meeting Room 5.1, Level 5 School of Economics Singapore Management University 90 Stamford Road Singapore 178903