%0 Journal Article %A Cheng, Wenli %A Zhang, Dingsheng %D 2017 %T Domestic and Global Sourcing %U https://bridges.monash.edu/articles/journal_contribution/Domestic_and_Global_Sourcing/5084980 %R 10.4225/03/59377aedd0844 %2 https://bridges.monash.edu/ndownloader/files/8617756 %K Ricardian model %K monash:2188 %K 1959.1/2188 %K endogenous sourcing decisions %K 2005 %K transaction costs %X This paper develops a general equilibrium Ricardian model with transaction costs to investigate the determinants of the firm's sourcing decision. It derives conditions under which different sourcing choices and corresponding trade patterns occur in general equilibrium. These conditions suggest that, inter alia, the choice between vertical integration and specialisation depends on the relative internal transaction costs associated with vertical integration and external transaction costs associated with international outsourcing; and that the equilibrium sourcing structures and trade patterns are consistent with a refined theory of comparative advantage that incorporates the effects of transaction costs in international trade. %I Monash University