Integration versus Outsourcing in Stable Industry Equilibrium with Communication Networks

Okamoto Yusuke

No 54, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

Abstract: For the selection of a firm's structure between vertical integration and arm's-length outsourcing, the importance of the thickness of the market had been emphasized in the previous literature. Here we take account of communication networks such as telephone, telex, fax, and the Internet. By doing so, we could illustrate the relationship between communication networks and the make-or-buy decision. With communication network technology differing in each type of firm, both vertically integrated firms and arm's-length outsourcing firms coexist, which was never indicated in the previous literature. However, when common network technology is introduced, such coexistence generically does not occur.

Keywords: Buyer-supplier relationship; Communication networks; International outsourcing; Vertical integration; Communication; Network; Industrial management; Telecommunication; コミュニケーション; ネットワーク; 企業経営; 電信; 336 (search for similar items in EconPapers)
JEL-codes: D23 D43 F23 (search for similar items in EconPapers)
Date: 2006-03-01
New Economics Papers: this item is included in nep-cse, nep-mic and nep-net
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Published in IDE Discussion Paper = IDE Discussion Paper, No. 54. 2006-03-01

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