Managing Export Complexity: The Role of Service Outsourcing
Title: Managing Export Complexity: The Role of Service Outsourcing
Abstract: Exporting involves sunk and fixed costs in the form of service inputs, and whether such services are made in-house or bought from external agencies is a key organizational margin. We study such outsourcing decisions in a theoretical framework in which firms trade off managerial strain and ex-post adaptation costs. Using data from France and a novel instrumental variable, we document the service inputs needed to access foreign markets and provide empirical evidence that these are typically outsourced. In line with the model, this pattern is strong for services with high adaptation costs and when firms have little managerial capability available.