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Determinants of firms' inputs sourcing choices: the role of institutional and regulatory factors. ESRI WP599, September 2018

Di Ubaldo, Mattia and Siedschlag, Iulia (2018) Determinants of firms' inputs sourcing choices: the role of institutional and regulatory factors. ESRI WP599, September 2018. [Working Paper]

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    Using the theoretical framework of global sourcing with firm heterogeneity, we examine determinants of inputs sourcing choices of manufacturing firms established in the EU countries. To this purpose, we combine information on the ownership structure and company accounts from the Orbis data set with input-output data from the World Input-Output Tables (WIOT) and with information on institutional and regulatory factors at country level provided by international organisations. Our research findings indicate that manufacturing firms that source inputs intra-firm via foreign direct investment (FDI) across EU countries are larger, more productive, more intensive in tangible and intangible capital and less intensive in skills than manufacturing firms that source inputs at arm’s length. The probability of integrating inputs by manufacturing firms across EU countries is positively linked with the strength of legal systems, flexibility of labour markets and negatively linked to corporate tax rates and financial development in host countries. Less efficient insolvency procedures are associated with a higher probability of sourcing inputs intra-firm via FDI relative to arm’s length sourcing. The probability of sourcing inputs via FDI is negatively linked to sectoral restrictions to FDI and positively linked to the impact of service regulations on downstream industries.

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    Item Type: Working Paper
    Subjects for non-EU documents: EU policies and themes > External relations > EU-US
    Countries > Ireland
    Countries > U.K.
    Countries > Japan
    EU policies and themes > Policies & related activities > economic and financial affairs > business/private economic activity
    Subjects for EU documents: UNSPECIFIED
    EU Series and Periodicals: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > Economic and Social Research Institute (ESRI), Dublin > ESRI Working Papers
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 29 Dec 2019 18:11
    Number of Pages: 27
    Last Modified: 29 Dec 2019 18:11

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