Firms' boundaries and the division of labor: empirical strategies

Garicano, Luis and Hubbard, Thomas N. (2006) Firms' boundaries and the division of labor: empirical strategies. Journal of the European Economic Association, 1 (2-3). pp. 495-502. ISSN 1542-4774

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Abstract

A large theoretical literature focuses on the question: What determines firms' boundaries? Recently, Garicano and Santos and Holmstrom and Milgrom have proposed theories in which firms' boundaries reflect the division of labor across individuals. This paper discusses strategies for generating and testing empirical propositions from this emerging class of theories. We propose that variation in the returns to specialization is extremely useful to test and quantify the effect of the division of labor on firms' boundaries. We discuss the use of two shifters to the returns to specialization, and relate how we exploit one of these, market size, in preliminary work on the determinants of law firms' boundaries in the United States

Item Type:	Article
Official URL:	http://www.mitpressjournals.org/loi/jeea
Additional Information:	© 2009 The MIT Press
Divisions:	Management Centre for Economic Performance
Subjects:	H Social Sciences > HC Economic History and Conditions
JEL classification:	L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L22 - Firm Organization and Market Structure: Markets vs. Hierarchies; Vertical Integration; Conglomerates; Subsidiaries L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L24 - Contracting Out; Joint Ventures; Technology Licensing L - Industrial Organization > L8 - Industry Studies: Services > L84 - Personal, Professional, and Business Services L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L14 - Transactional Relationships; Contracts and Reputation; Networks
Date Deposited:	27 Oct 2009 17:03
Last Modified:	15 Apr 2024 14:45
URI:	http://eprints.lse.ac.uk/id/eprint/25552

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