Make-or-buy decisions of multinational firms depend on the technological importance of the product

a column by Giuseppe Berlingieri, Frank Pisch and Claudia Steinwender for VOX: CEPR’s Policy Portal

Multinationals with large and complex production networks have become a dominant feature of today’s economies. But while their supply networks are large, this does not mean that they own every step of the global production chain.

This column examines French firms’ decision whether to source imported inputs from independent suppliers or from affiliates. The results show that multinationals typically own and source from international suppliers that provide technologically important inputs – that is, those that account for a high share of costs.

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