Come together: firm boundaries and delegation

Alfaro, Laura, Bloom, Nick, Conconi, Paola, Fadinger, Harald, Legros, Patrick, Newman, Andrew F., Sadun, Raffaella and Van Reenen, John ORCID: 0000-0001-9153-2907 (2018) Come together: firm boundaries and delegation. CEP Discussion Papers (1547). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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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.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information:	© 2018 The Authors, revised 2022
Divisions:	Centre for Economic Performance
Subjects:	H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
JEL classification:	D - Microeconomics > D2 - Production and Organizations L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior
Date Deposited:	27 Jun 2018 08:54
Last Modified:	09 May 2025 01:43
Funders:	Economic and Social Research Council
URI:	http://eprints.lse.ac.uk/id/eprint/88698

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