Come together
Subtitle: firm boundaries and delegation
By: Laura Alfaro, Harvard Business School, Nick Bloom, Stanford University, Paola Conconi, Universite Libre de Bruxelles, Harald Fadinger, University of Mannheim, Patrick Legros, Universite Libre de Bruxelles, Andrew F. Newman, Boston University, Raffaella Sadun, Harvard Business School, John Van Reenen, Massachusetts Institute of Technology
Series: Working paper / Harvard Business School -- 18-051; Working paper (Harvard Business School) -- 18-051
Publisher: Harvard Business School
Published: 2017
Place of publication: Boston
Language: eng
Number of pages: 43
Description: 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 where firms choose which suppliers to integrate and whether to delegate decisions to integrated suppliers or keep them centralized. We test the predictions of this model using a novel dataset that combines measures of vertical integration and delegation for a large set of firms operating in many countries and industries. In line with the model's predictions, we find that integration and delegation covary positively, and that producers are more likely to integrate suppliers in input sectors with greater productivity variation.
Notes: Includes bibliographical references (pages 29-32).