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Come Together: Firm Boundaries and Delegation

Laura Alfaro (), Nicholas Bloom (), Paola Conconi (), Harald Fadinger, Patrick Legros, Andrew F. Newman, Raffaella Sadun () and John van Reenen ()

No 7054, CESifo Working Paper Series from CESifo Group Munich

Abstract: Little is known theoretically, and even less empirically, about the relationship between firm boundaries and the allocation of decision rights within firms. We develop a model in which firms choose which suppliers to integrate and whether to delegate decisions to integrated suppliers. We test the predictions of the model using a novel dataset that combines measures of vertical integration and delegation for a large set of firms from many countries and industries. In line with the model’s predictions, we obtain three main results: (i) integration and delegation co-vary positively; (ii) producers are more likely to integrate suppliers in input sectors with greater productivity variation (as the option value of integration is greater); and (iii) producers are more likely to integrate suppliers of more important inputs and to delegate decisions to them.

Keywords: vertical integration; delegation; real options; supply assurance (search for similar items in EconPapers)
JEL-codes: D20 L20 (search for similar items in EconPapers)
Date: 2018
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https://www.cesifo-group.de/DocDL/cesifo1_wp7054.pdf (application/pdf)

Related works:
Working Paper: Come Together: Firm Boundaries and Delegation (2019) Downloads
Working Paper: Come Together: Firm Boundaries and Delegation (2018) Downloads
Working Paper: Come Together: Firm Boundaries and Delegation (2018) Downloads
Working Paper: Come Together: Firm Boundaries and Delegation (2018) Downloads
Working Paper: Come Together: Firm Boundaries and Delegation (2018) Downloads
Working Paper: Come Together: Firm Boundaries and Delegation (2018) Downloads
Working Paper: Come together: firm boundaries and delegation (2018) Downloads
Working Paper: Come Together: Firm Boundaries and Delegation (2018) Downloads
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