Full Citation

Title: Technology and Production Fragmentation: Domestic versus Foreign Sourcing

Citation Type: Miscellaneous

Publication Year: 2014

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Abstract: This paper provides direct empirical evidence about how technology affects firms' global sourcing strategies. Using new data on U.S. firms' decisions to contract for manufacturing services from domestic or foreign suppliers, I estimate a large differential impact of firm communication technology on the probability of fragmentation across industries. The effect of firm technology is more than two standard deviations higher in industries whose production specifications are easier to codify in an electronic format, relative to industries in which they are not. The data also show that communication technology lowers coordination costs disproportionately more for domestic rather than foreign fragmentation. This finding highlights the importance of domestic fragmentation as an alternative to offshoring and can be explained by complementarities between technology and worker skills.

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Authors: Fort, Teresa C.

Publisher: Tuck School of Business at Dartmouth

Data Collections: IPUMS USA

Topics: Labor Force and Occupational Structure, Other

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