A Study of Multinational and Local Firm Linkages in India

Sanjaya Lall

Chapter 12 in Multinationals, Technology and Exports, 1985, pp 263-292 from Palgrave Macmillan

Abstract: Abstract The nature of the direct relationships established between firms engaged in complementary activities, buying from and selling to each other, is a murky area in the study of industrial economics. Vertically related firms need to co-ordinate their activities by exchanging information of various types: they have to learn about the quantities available and required at present and in the future, about the prices set, about the nature and reliability of suppliers and buyers, about the precise technical characteristics of the products to be exchanged, and about the changes in such products as they undergo improvement and technical innovation. In economic theory, a perfectly functioning market achieves the required co-ordination costlessly. In a world of large numbers of buyers and sellers, which operate in competitive conditions with perfect foresight and which possess all the knowledge (including technology) they need, the necessary information is exchanged without any transaction cost. There is no need for any firm to bypass the market since it is, by assumption, able to maximise its profits within the ‘pure’ market framework.2 There is, therefore, no need for them to establish any extra-market direct linkages with each other.

Keywords: Small Firm; Vertical Integration; Inventory Holding; Large Supplier; United Nations Industrial Development Organization (search for similar items in EconPapers)
Date: 1985
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DOI: 10.1007/978-1-349-17952-7_12

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