Does Offshoring Squeeze Out Firms? A Schumpeterian View Revisited

초록

We have often observed cases where success in offshore outsourcing entails domestic market power as well as monopoly rent, thereby crowding out those failed to secure a contract with efficient foreign partners. In this paper, we provide a two-stage Schumpeterian differential game in order to explain the prevalence of offshore outsourcing activities despite the so-called Schumpeterian squeezing effect of international outsourcing. We find that the number of firms joining offshore outsourcing activities may be positively or negatively affected by the competitive toughness of the search-and-matching race, depending on the initial industry size.

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