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Tekijä: | Kerschbamer, R. Maderner, N. Tournas, Y. |
Otsikko: | Idiosyncratic investments, outside opportunities and the boundaries of the firm |
Lehti: | International Journal of Industrial Organization
2002 : OCT, VOL. 20:8, p. 1119-1142 |
Asiasana: | INVESTMENT CONTRACTS COMMITMENT TRANSACTION COSTS |
Kieli: | eng |
Tiivistelmä: | This paper adopts the incomplete contracting perspective to study a firm's continuous choice between producing an essential input in-house (full integration), buying it from an outside supplier (non-integration) and doing a combination of both (tapered integration), when (i) an idiosyncratic capacity investment is required to produce the essential input and (ii) under non-integration outside opportunities are better. It is shown that the firm's boundary choice depends crucially on its commitment power. If the firm can precommit to a particular provision mode, tapered integration will be chosen more frequently. Also, with commitment power, the firm will never subcontract only a small portion of its input needs. In- house capacity is smaller and outside capacity larger if the firm can precommit. |
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