Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/96240
Authors: 
Nowak, Verena
Schwarz, Christian
Suedekum, Jens
Year of Publication: 
2014
Series/Report no.: 
DICE Discussion Paper 141
Abstract: 
We consider a property rights model of a firm with two heterogeneous suppliers. The headquarters determine the firm's organizational structure, and we analyze which sourcing mode (outsourcing or vertical integration) is chosen for which of the asymmetric inputs. If suppliers' investment choices are strategic complements, the firm may keep the technologically more important input inside its boundaries and outsource the less important supplier. The firm also tends to keep more sophisticated inputs in-house, while choosing an external supplier organization for simpler and for low-cost components. These theoretical predictions are consistent with numerous case studies and recent empirical evidence on the internal organization of firms.
Subjects: 
firm organization
outsourcing
intra-firm trade
property rights approach
JEL: 
D23
L23
F23
ISBN: 
978-3-86304-140-3
Document Type: 
Working Paper

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