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Capturing Knowledge within and across Firm Boundaries: Evidence from Clinical Development

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  • Pierre Azoulay
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    Abstract

    How do firm boundaries influence employees' acquisition of information? Using detailed project-level data and qualitative evidence, I document that pharmaceutical firms are more likely to outsource the coordination of data-intensive clinical trials, while they are more likely to assign knowledge-intensive trials to internal teams. Managers do not choose between market and hierarchy, but between the hierarchy of the firm—in which subjective performance evaluations are combined with flat explicit incentives—and the hierarchy of its subcontractor—whose virtue stems precisely from the ability to provide high-powered incentives on a narrow set of monitorable tasks.

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    Bibliographic Info

    Article provided by American Economic Association in its journal American Economic Review.

    Volume (Year): 94 (2004)
    Issue (Month): 5 (December)
    Pages: 1591-1612

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    Handle: RePEc:aea:aecrev:v:94:y:2004:i:5:p:1591-1612

    Note: DOI: 10.1257/0002828043052259
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    References

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    Cited by:
    1. Timothy Bresnahan & Jonathan Levin, 2012. "Vertical Integration and Market Structure
      [The Handbook of Organizational Economics]
      ," Introductory Chapters, Princeton University Press.
    2. Gil, Ricard, 2007. ""Make-or-buy" in movies: Integration and ex-post renegotiation," International Journal of Industrial Organization, Elsevier, vol. 25(4), pages 643-655, August.
    3. repec:ste:nystbu:06-23 is not listed on IDEAS
    4. Casey Ichniowski & Kathryn L. Shaw, 2009. "Insider Econometrics: Empirical Studies of How Management Matters," NBER Working Papers 15618, National Bureau of Economic Research, Inc.
    5. Costinot, Arnaud & Oldenski, Lindsay & Rauch, James, 2009. "Adaptation and the Boundary of Multinational Firms," CCES Discussion Paper Series 14, Center for Research on Contemporary Economic Systems, Graduate School of Economics, Hitotsubashi University.
    6. Elisabetta Magnani & David Prentice, 2006. "Outsourcing and Unionisation: A tale of misallocated (resistance) resources," Working Papers 2006.03, School of Economics, La Trobe University.
    7. Janis Kapler, . "The Theory of the Firm, the Theory of Competition and the Transnational Corporation," Working Papers 6, University of Massachusetts Boston, Economics Department.
    8. Sharon Novak & Scott Stern, 2007. "Complementarity Among Vertical Integration Decisions: Evidence from Automobile Product Development," NBER Working Papers 13232, National Bureau of Economic Research, Inc.

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