Contract Incompleteness and the Boundaries of the Firm in Times of COVID-19

Marta Bernasconi, Sara Galetti, Valeria Gattai and Piergiovanna Natale ()
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Marta Bernasconi: Università degli Studi di Milano-Bicocca
Sara Galetti: Università degli Studi di Milano-Bicocca
Valeria Gattai: Università degli Studi di Milano-Bicocca
Piergiovanna Natale: Università degli Studi di Milano-Bicocca

Journal of Industry, Competition and Trade, 2022, vol. 22, issue 3, No 3, 409 pages

Abstract: Abstract In this paper, we study the firm’s boundaries in times of COVID-19. Ownership and location decisions govern sourcing and shape firms’ boundaries. Adopting incomplete contracts theory/international economics perspective, we investigate the determinants of ownership and location decisions and explore COVID-19–induced changes in firms’ boundaries. Drawing on survey data from a sample of Italian firms, our estimates suggest that input specificity drives the ownership decision, whereas the location decision depends on productivity. Few firms re-consider sourcing because of the pandemic, suggesting a great deal of inertia in firm’s boundaries.

Keywords: Contract incompleteness; Firm boundaries; COVID-19; Italy; Firm-level survey data; F23; D23; C35 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s10842-022-00387-7

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