Outsourcing when Investments are Specific and Complementary
(with Johannes Van Biesebroeck)
Journal of European Economic Association , 2013, 11(4), 871-896.
Abstract: Using the universe of large Canadian manufacturing firms in 1988 and 1996, we investigate to what extent outsourcing patterns concord with the predictions of a simple property rights model. The unique availability of disaggregate information on outputs as well as inputs permits the construction of a detailed measure of vertical integration. We rely on five measures of technological intensity to proxy for investments that are likely to be specific to a buyer-seller relationship. A theoretical model that allows for varying degrees of investment specificity and interrelatedness-externalities between buyer and supplier investments-guides the analysis. Property rights predictions on the link between investment intensities and optimal ownership are strongly supported, but only for transactions with low interrelatedness. High specificity and low risk of appropriation strengthen the predictions in the model and in the data.
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Improved Access to Foreign Markets Raises Plant-Level Productivity... for Some Plants
(with Daniel Trefler)
Quarterly Journal of Economics , 2010, 125(3), 1051-1099.
Abstract: Market size matters for innovation and hence for productivity. Improved access to foreign markets will thus encourage firms to simultaneously export and invest in raising productivity. We examine this insight using the responses of Canadian plants to the elimination of U.S. tariffs. Unique "plant-specific" tariff cuts serve as an instrument for changes in exporting. We find that Canadian plants that were induced by the tariff cuts to start exporting or to export more (a) increased their labor productivity, (b) engaged in more product innovation, and (c) had higher adoption rates for advanced manufacturing technologies. Further, these responses were heterogeneous.
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The Benefits to Domestically Owned Plants from Inward Direct Investment: The Role of Vertical Linkages
Canadian Journal of Economics , 2010, 43(2), 574-603.
Abstract: The paper estimates the effects of the U.S. direct investment in Canada upon productivity in domestically owned plants. We distinguish between FDI in the industry of domestically controlled plants and FDI in the industries linked through supply or use of intermediate inputs. We find that an increase in supplier FDI increases productivity growth in domestically controlled plants. The positive productivity effects of FDI are more pronounced for plants that buy more intermediates and who purchase science-based intermediate inputs (i.e., electronics, machinery and equipment, and chemicals). Productivity of domestic plants also benefits from larger-scale and higher rates of advanced technologies adoption.
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Trade Liberalization and Productivity Dynamics: Evidence from Canada
Canadian Journal of Economics , 2008, 41(2), 360-390.
Abstract: The paper investigates the productivity effects of the Canada-U.S. Free Trade Agreement on Canadian manufacturing. It finds that Canadian tariff cuts increased exit rates among moderately productive non-exporting plants. This led to the reallocation of market share towards highly productive plants, which explains the aggregate productivity gains observed when Canadian tariffs were reduced. The U.S. tariff cuts led to the within-plant productivity gains in exporters and, especially, new entrants into the export market. Any lack of output responses and labour-shedding as a consequence of the FTA was experienced by non-exporting plants, while exporters captured the gains from the FTA.
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