Service Offshoring and Export Experience

60 Pages Posted: 11 Jun 2021

See all articles by Giuseppe Berlingieri

Giuseppe Berlingieri

ESSEC Business School - Economics Department; Organization for Economic Co-Operation and Development (OECD) - Directorate for Science, Technology and Industry (STI); London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP)

Emanuel Ornelas

Sao Paulo School of Economics

Luca Marcolin

KU Leuven

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Date Written: 2021

Abstract

Service inputs are a key component of the costs of exporting, and contribute to explain the process of internationalization of firms. A new dataset on the participation of French firms in global value chains reveals that firms with longer export experience in a market are more likely to source service inputs from there. We rationalize this fact in a model where firms are initially uncertain about how successful they are as exporters, but learn their export profitability as they keep selling abroad. Because offshoring requires larger sunk costs than domestic sourcing, some firms decide to offshore only when they become sufficiently confident about their export prospects, i.e., once they acquire enough export experience. More export experience in a foreign destination also induces firms to offshore within the boundaries of the firm rather than at arm’s length. The model further implies that firms are more likely to offshore when frictions in the provision of services between the domestic and the foreign market are greater. In turn, offshoring firms sell greater volumes, display less volatility, and are less likely to exit foreign markets. Exploiting our novel dataset, we provide strong empirical support for each of these predictions.

JEL Classification: F120, F140, F230, L220, L230, L840

Suggested Citation

Berlingieri, Giuseppe and Ornelas, Emanuel and Marcolin, Luca, Service Offshoring and Export Experience (2021). CESifo Working Paper No. 9126, Available at SSRN: https://ssrn.com/abstract=3863829 or http://dx.doi.org/10.2139/ssrn.3863829

Giuseppe Berlingieri (Contact Author)

ESSEC Business School - Economics Department ( email )

95021 Cergy-Pontoise Cedex
France

Organization for Economic Co-Operation and Development (OECD) - Directorate for Science, Technology and Industry (STI) ( email )

Paris
France

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Emanuel Ornelas

Sao Paulo School of Economics ( email )

Rua Itapeva 474 s.1202
São Paulo, São Paulo 01332-000
Brazil

HOME PAGE: http://https://sites.google.com/site/emanuelornelaseo/

Luca Marcolin

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

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