Asymmetric spiders: Supplier heterogeneity and the organization of firms

Verena Nowak, Christian Schwarz and Jens Suedekum

No 141, DICE Discussion Papers from Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE)

Abstract: We consider a property rights model of a firm with two heterogeneous suppliers. The headquarters determine the firm's organizational structure, and we analyze which sourcing mode (outsourcing or vertical integration) is chosen for which of the asymmetric inputs. If suppliers' investment choices are strategic complements, the firm may keep the technologically more important input inside its boundaries and outsource the less important supplier. The firm also tends to keep more sophisticated inputs in-house, while choosing an external supplier organization for simpler and for low-cost components. These theoretical predictions are consistent with numerous case studies and recent empirical evidence on the internal organization of firms.

Keywords: firm organization; outsourcing; intra-firm trade; property rights approach (search for similar items in EconPapers)
JEL-codes: D23 F23 L23 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-bec and nep-com
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Asymmetric spiders: Supplier heterogeneity and the organization of firms (2016)
Journal Article: Asymmetric spiders: Supplier heterogeneity and the organization of firms (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:dicedp:141

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