TY  - BOOK
AU  - Gorodnichenko,Yuriy
AU  - Kukharskyy,Bohdan
AU  - Roland,Gerard
ED  - National Bureau of Economic Research.
TI  - Culture and Global Sourcing
T2  - NBER working paper series
PY  - 2015///
CY  - Cambridge, Mass.
PB  - National Bureau of Economic Research
N1  - May 2015; Hardcopy version available to institutional subscribers
N2  - This paper develops a model of global sourcing with culturally dissimilar countries. Production of final goods requires  the coordination of decisions between the headquarter of a multinational firm and managers of their component suppliers. Managers of both units are assumed to have strong beliefs about the right course of action and are reluctant to adjust their decisions. We characterize the optimal allocation of decision rights across firms when contracts are incomplete. Our theoretical model delivers two key predictions: the incentive of a firm to integrate (rather than outsource) its input supply is decreasing in the cultural distance between the home and the host country and decreasing in trade costs between the two countries. Combining data from the U.S. Census Bureau's Related Party Trade with various measures for cultural distance and trade cost, we find empirical evidence strongly supportive of these two predictions
UR  - https://www.nber.org/papers/w21198
UR  - http://dx.doi.org/10.3386/w21198
ER  -