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| Author: | Choi, J.P. Davidson, C. |
| Title: | Strategic second sourcing by multinationals |
| Journal: | International Economic Review
2004 : MAY, VOL. 45:2, p. 579-600 |
| Index terms: | Multinational companies Production management Strategy |
| Language: | eng |
| Abstract: | Multinationals often serve foreign markets by exporting as well as by investing directly in foreign production facilities. The authors argue that if the multinational competes in an oligopolistic market characterized by strategic complements then there are strategic reasons to use two production facilities - committing to a second source allows the company to keep average cost low while increasing its marginal cost. The increase in marginal cost softens product market competition resulting in higher profits. |
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