Template-Type: ReDIF-Paper 1.0
Title: Come Together: Firm Boundaries and Delegation
Author-Name: Laura Alfaro
Author-Email: 
Author-Name: Nick Bloom
Author-Email: 
Author-Name: Paola Conconi
Author-Email: 
Author-Name: Harald Fadinger
Author-Email:
Author-Name: Patrick Legros
Author-Email:
Author-Name: Andrew F. Newman
Author-Email:
Author-Name: Raffaella Sadun
Author-Email:
Author-Name: John Van Reenen
Author-Email:
Classification-JEL: D2, L2

Keywords: Vertical integration, delegation, real options, supply assurance


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.

Note: 
Length: 58
Creation-Date: 2018-05
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp017
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2018_017