How Wide Is the Firm Border?

Enghin Atalay, Ali Hortacsu, Mary Jialin Li and Chad Syverson

The Quarterly Journal of Economics, 2019, vol. 134, issue 4, 1845-1882

Abstract: We examine the within- and across-firm shipment decisions of tens of thousands of goods-producing and goods-distributing establishments. This allows us to quantify the normally unobservable forces that determine firm boundaries, that is, which transactions are mediated by ownership control, as opposed to contracts or markets. We find firm boundaries to be an economically significant barrier to trade: having an additional vertically integrated establishment in a given destination ZIP code has the same effect on shipment volumes as a 40% reduction in distance. These effects are larger for high value-to-weight products, faraway destinations, differentiated products, and IT-intensive industries.

Date: 2019
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Related works:
Working Paper: How Wide Is the Firm Border? (2019)
Working Paper: How Wide is the Firm Border? (2018)
Working Paper: How Wide Is the Firm Border? (2017)
Working Paper: How Wide Is the Firm Border? (2017)
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