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The Firm as an Inspector: Private Ordering and Political Rules

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  • Heritier Adrienne

    (European University Institute Florence)

  • Mueller-Debus Anna K

    (European University Institute)

  • Thauer Christian R

    (European University Institute)

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    Abstract

    With increasing fragmentation of worldwide production chains and the corresponding contracting relations between companies, the “firm as an inspector" has become a frequent phenomenon. Buyer firms deploy supervising activities over their suppliers' products and production processes in order to ensure their compliance with regulatory standards, thereby taking on tasks commonly performed by public authorities. Why would a firm engage in such activities? In this article we will analyze the conditions under which firms play the role of an inspector vis-à-vis their sub-contractor firms to guarantee compliance with quality and environmental regulations. We develop a theoretical argument based on transaction cost economics and institutionalism to offer hypothetical answers to this question and provide an empirical assessment of our hypotheses.

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    Bibliographic Info

    Article provided by De Gruyter in its journal Business and Politics.

    Volume (Year): 11 (2010)
    Issue (Month): 4 (January)
    Pages: 1-34

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    Handle: RePEc:bpj:buspol:v:11:y:2010:i:4:n:2

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    Web page: http://www.degruyter.com

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