Economising, Strategising and the Vertical Boundaries of the Firm

Dermot Leahy; Catia Montagna

doi:10.1515/bejte-2015-0085

Economising, Strategising and the Vertical Boundaries of the Firm

Dermot Leahy, Catia Montagna^* (Corresponding Author)

^*Corresponding author for this work

Economics

University of Galway

Research output: Contribution to journal › Article › peer-review

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Abstract

We bridge the organisational economics and industrial economics literatures on the vertical boundaries of the firm by contextualising the transaction cost approach to the make-or-buy decision within an oligopolistic market structure. Firms invest in the quality of the intermediate resulting in the endogenous determination of the price of the intermediate and marginal production cost of the final good. We highlight new strategic incentives to outsource and/or vertically integrate and show how these incentives can result in asymmetric-mode-of-operations, investment and costs. We apply our model to a number of different international trading setups.

Original language	English
Article number	20150085
Number of pages	35
Journal	B.E. Journal of Theoretical Economics
Volume	17
Issue number	1
Early online date	17 Jun 2016
DOIs	https://doi.org/10.1515/bejte-2015-0085
Publication status	Published - Jan 2017

Bibliographical note

Acknowledgments: We are grateful to Celine Azemar, Ron Davies, Rodolphe Desbordes, Hartmut Egger, Holger Görg, Michael Moore, Ali Naghavi, Peter Neary, Pascalis RaimondosMøller, Ian Wooton and two anonymous referees for useful comments and suggestions. The usual disclaimer applies.

Keywords

Oligopoly
Outsourcing
Vertical Integration
Trade Liberalisation

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Economising, Strategising and the Vertical Boundaries of the firm
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Catia Montagna
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Cite this

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title = "Economising, Strategising and the Vertical Boundaries of the Firm",

abstract = "We bridge the organisational economics and industrial economics literatures on the vertical boundaries of the firm by contextualising the transaction cost approach to the make-or-buy decision within an oligopolistic market structure. Firms invest in the quality of the intermediate resulting in the endogenous determination of the price of the intermediate and marginal production cost of the final good. We highlight new strategic incentives to outsource and/or vertically integrate and show how these incentives can result in asymmetric-mode-of-operations, investment and costs. We apply our model to a number of different international trading setups.",

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N2 - We bridge the organisational economics and industrial economics literatures on the vertical boundaries of the firm by contextualising the transaction cost approach to the make-or-buy decision within an oligopolistic market structure. Firms invest in the quality of the intermediate resulting in the endogenous determination of the price of the intermediate and marginal production cost of the final good. We highlight new strategic incentives to outsource and/or vertically integrate and show how these incentives can result in asymmetric-mode-of-operations, investment and costs. We apply our model to a number of different international trading setups.

AB - We bridge the organisational economics and industrial economics literatures on the vertical boundaries of the firm by contextualising the transaction cost approach to the make-or-buy decision within an oligopolistic market structure. Firms invest in the quality of the intermediate resulting in the endogenous determination of the price of the intermediate and marginal production cost of the final good. We highlight new strategic incentives to outsource and/or vertically integrate and show how these incentives can result in asymmetric-mode-of-operations, investment and costs. We apply our model to a number of different international trading setups.

KW - Oligopoly

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KW - Vertical Integration

KW - Trade Liberalisation

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ER -

Economising, Strategising and the Vertical Boundaries of the Firm

Abstract

Bibliographical note

Keywords

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