In recent decades, complex manufacturing sectors such as electronics have transformed from an industry dominated by vertically integrated firms that source locally to an industry dominated by horizontally specialized firms that source globally. To account for this, we build an two-country...

This paper considers the trade-off between leveraging external sources of innovation by outsourcing design and engineering activities and the ability to develop internal product development competences. The trade-off arises because the division of labor within and across firms' boundaries has a...