This paper studies how firms' offshoring decisions shape a country's domestic production networks. We develop a model … foreign suppliers, due to costly communication. Triggered by foreign countries' export supply shocks, firms start offshoring … net effect of offshoring on a firm’s domestic production networks depends on the relative strength of the three effects …

increasing offshoring activity increases competition in the final goods market, leading to a progressive vertical disintegration … of the supply chains. Initially, the firms that decide to explore offshoring potential choose integration. As competition …