Organization Choices Of Firm, Export And Outsourcing

During the past decades of years, vertical specialized production, which was directed by multinational corporations(MNCs), has become a prevalent phenomenon. Multinational corporations put different production phases of a product in different countries or regions by outsourcing and foreign direct investment, and set up a world-wide production sharing system.In this system, MNCs, their subsidiaries and individual companies who undertake the outsourcing part of MNCs'are distributed into different stages of the value chain of the same product, relevant and tied to each other. They finish the whole production work of a good together.The deepening global product division mode provides a good chance for developing countries. Developing countries could adjust their status in value chain, update industrial structure, improve foreign trade and solve unemployment problem by participating in global outsourcing. China, as the largest developing country, plays a more and more important role in global vertical specialized production system, carries on more and more MNCs'production transference, and changes from labor intensive processing and assembling work to capital and technical intensive labeled-brand production.Because of the deepening of global vertical specialized production, different stages of a good were produced in the country which has the most advantage, intermediate goods go across national boundaries for many times, increasing intermediate products trade and intra-good trade, at the same time, changing firms' boundary and blurs product origin.This dissertation aims at analyzing the decisive factors of MNCs'global vertical specialized production decision and their, organization choices in a general equilibrium framework. According to the conclusions of theory analysis, this dissertation points out the policy implication, the problems and improvement suggestions for China's participating in global vertical specialized production which could upgrade the industrial structure and solve unemployment problem.This dissertation mainly uses the combination of theoretical models and empirical studies, and the combination of static analysis and comparative static analysis in a unified heterogeneous goods production framework. From the view of microscopic corporation, this dissertation analyzes the decisive factors of MNCs' vertical specialized production, effect of transaction cost and residual right to firms' decision. At last, this dissertation does empirical studies using China's realistic data.In theoretic analysis, this dissertation puts international trade and foreign direct investment in a general equilibrium framework. Based on DS monopolistic competition, this dissertation analyzes the decisive factors of MNCs'vertical specialized production decision when their production needs multiple intermediate goods in complete contract, and their relative organization choices.The influential factors of vertical specialized production including transportation cost, fixed cost, wages differences between home and host country, MNCs' productivity differences and so on. On this basis, this dissertation continues analyzing how transaction cost influence firm's vertical specialization decision when the contract is incomplete. That is, MNCs need specified intermediate good, have to find an intermediate good producer to supply input for them in the host country, so there is a searching cost. So the market thickness of the host country and the number of final good producer will influence MNCs'vertical specialization decision. The final part of theoretical study analyzes the influence of MNCs'residual right to vertical specialized organization mode, that is, will MNCs choose vertical integration organization mode or outsource to individual firms of the host country.The empirical part of this dissertation, based on theoretical part and use China's data, analyzes China's participation in global vertical specialized production. The empirical analysis mainly includes three parts. In the first part, the situation of China's participation in vertical specialization is measured by indicators from the whole, regional and industry point of view. In the second part, the market thickness' influence to China's participation in vertical specialization and outsourcing undertaking is analyzed from the view of industry.In the third part, using China's different provinces and regions'data, contract execution costs differences'influence to China's participation in vertical specialization is analyzed. In this part, because most of China's participation in vertical specialization and outsourcing are from MNCs'direct investment firms, so we also analyzes FDI's influence to China's participation in vertical specialization.In the part of policy recommendations, this dissertation proposes the policy implications of China's participation in vertical specialization, including:China's advantage in participating global vertical specialization, problems and policy suggestions for Chinese government and firms.Base on these studies, this dissertation comes to the following conclusions:From firm's level point of view, when contract is complete, the higher is transportation cost's ratio of final goods and intermediate good, MNCs will allocate more production phases abroad; the larger is wage difference between north and south countries, MNCs will allocate more production phases abroad; the lower is fixed cost's ratio of vertical specialization and export, MNCs will allocate more production phases abroad.In the situation of incomplete contract, transaction cost will influence firm's vertical specialization decision. Market thickness will directly influence transaction cost, then influence firm's choice between vertical specialized production and export. And MNCs'residual right will influence their choices between outsourcing and FDI.