How Do Trade and Communication Costs Shape the Spatial Organization of Firms?

Toshitaka Gokan, Sergey Kichko, Jacques Thisse and Sergei Kichko

No 7888, CESifo Working Paper Series from CESifo

Abstract: We consider an economic geography setting in which firms are free to choose one of the following organizational types: (i) integrated firms, which perform all their activities at the same location, (ii) horizontal firms, which operate several plants producing the same good at different locations, and (iii) vertical firms, which perform distinct activities at separated locations. We show that there exists a unique organizational equilibrium, which typically involves the coexistence of various organizational forms. We also give necessary and sufficient conditions for the three types of firms to coexist within the same region and show that transportation and communication costs have opposite effects on firms’ organizational choices. This suggests that, depending on its nature, the supply of a new transportation infrastructure may lead to contrasted locational patterns.

Keywords: region; transportation costs; communication costs; horizontal firm; vertical firm (search for similar items in EconPapers)
JEL-codes: F12 F21 R12 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Working Paper: How do trade and communication costs shape the spatial organization of firms? (2020)
Journal Article: How do trade and communication costs shape the spatial organization of firms? (2019)
Working Paper: How do trade and communication costs shape the spatial organization of firms? (2019)
Working Paper: How Do Trade and Communication Costs Shape the Spatial Organization Of Firms? (2018)
Working Paper: How do trade and communication costs shape the spatial organization of firms? (2018)
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