 Come Together: Firm Boundaries and DelegationLaura Alfaro, Nicholas Bloom, Paola Conconi, Harald Fadinger, Patrick Legros, John Newman, Raffaella Sadun and John van Reenen No 2018-11, Working Papers ECARES from ULB -- Universite Libre de Bruxelles 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) Published by: Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eca:wpaper:2013/270659 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in Working Papers ECARES from ULB -- Universite Libre de Bruxelles Contact information at EDIRC. |
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