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

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We jointly study firm boundaries and the allocation of decision rights within them by confronting an incomplete-contracts model with data on vertical integration and delegation for thousands of firms around the world. Integration has an option value: it confers authority to delegate or centralize decision rights, depending on who can best solve problems that arise in the course of an uncertain production process. In line with the model's predictions, we find that firms are more likely to integrate suppliers that produce more valuable inputs and operate in industries with more dispersed productivity, and that firms delegate more decisions to integrated suppliers that produce more valuable inputs and operate in more productive industries.

Keywords: integration; delegation; real options; supply assurance (search for similar items in EconPapers)
JEL-codes: D2 L2 (search for similar items in EconPapers)
Pages: 65 pages
Date: 2018-05-10
New Economics Papers: this item is included in nep-com and nep-hrm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://eprints.lse.ac.uk/88698/ Open access version. (application/pdf)

Related works:
Journal Article: Come Together: Firm Boundaries and Delegation (2024)
Working Paper: Come together: firm boundaries and delegation (2024)
Working Paper: Come Together: Firm Boundaries and Delegation (2023)
Working Paper: Come Together: Firm Boundaries and Delegation (2019)
Working Paper: Come Together: Firm Boundaries and Delegation (2018)
Working Paper: Come Together: Firm Boundaries and Delegation (2018)
Working Paper: Come together: firm boundaries and delegation (2018)
Working Paper: Come Together: Firm Boundaries and Delegation (2018)
Working Paper: Come Together: Firm Boundaries and Delegation (2018)
Working Paper: Come Together: Firm Boundaries and Delegation (2018)
Working Paper: Come Together: Firm Boundaries and Delegation (2018)
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