Asymmetric spiders: Supplier heterogeneity and the organization of firms

Verena Nowak, Christian Schwarz and Jens Suedekum

Canadian Journal of Economics, 2016, vol. 49, issue 2, 663-684

Abstract: We consider a property rights model of a firm with two heterogeneous suppliers and analyze which sourcing mode (outsourcing or vertical integration) is chosen for which of the asymmetric inputs. If components are close substitutes, the firm tends to outsource the technologically more important input while keeping the less important one inside its boundaries. This pattern can be reversed, however, if the two inputs are strongly complementary. The firm also tends to outsource low-cost inputs and components with low sophistication. These theoretical predictions are consistent with numerous case studies and recent empirical evidence on the internal organization of firms.

JEL-codes: D23 (search for similar items in EconPapers)
Date: 2016
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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)
Working Paper: Asymmetric spiders: Supplier heterogeneity and the organization of firms (2014)
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