Tiziano Razzolini Davide Vannoni

Production to Order and Performance in Domestic and Foreign Markets

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Abstract

This paper contributes to the literature on firms' productivity and exporting decisions by analyzing the role played by organizational choice aspects. Rather than setting up a vertically integrated structure, manufacturers may act as sub-contractors in both domestic and foreign markets, and produce to satisfy the requirements of other firms. The predictions that the most productive firms self-select into exporting, while the least productive ones work as sub-contractors serving the domestic market only are tested on a sample of Italian firms observed in the 1998-2003 period. The results of our estimates highlight a ranking of firms consistent with the prediction of a "stylized" theoretical model, and provide a clear indication that firms using sub-contracting in foreign markets display lower TFP values as compared to "direct exporters".

Keywords

  • Export
  • Sub-contracting
  • Production to Order
  • Total Factor Productivity

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