search query: @indexterm FIRM (THEORY OF) / total: 191
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| Author: | Lewis, T. R. Sappington, D. E. M. |
| Title: | Technological change and the boundaries of the firm. |
| Journal: | American Economic Review
1991 : SEP, VOL. 81:4, p. 887-900 |
| Index terms: | FIRM (THEORY OF) MAKE OR BUY DECISIONS TECHNOLOGICAL CHANGE |
| Language: | eng |
| Abstract: | A firm's decision either to produce an essential input itself or to hire a subcontractor to produce the input is examined. The firm's profit-maximizing behaviour when faced with this trade-off is characterized. Especially, the problem of how this decision is affected by technological change in the industry is discussed. In general, cost-reducing technological change leads the firm to produce the input itself more often. The firm's calculus is shown to depend on whether the subcontractor's skills are idiosyncratic or transferable. In the latter case, technological progress can even be detrimental to the firm and to society as a whole. |
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