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From the Theory of the Firm to FDI and Internalisation: A Survey

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  • Valeria Gattai

    (Bocconi University and ISESAO)

Abstract

This paper surveys recent contributions on the Internalisation issue, based on different theories of the firm, to show how the make-or-buy decision, at an international level, has been assessed through the opening up of the “black box” – traditionally explored by the theorists of the firm – and the simultaneous endogenization of the market environment – as in the International Economics tradition. In particular, we consider three paradigms – Grossman Hart Moore treatment of holdup and contractual incompleteness, Holmstrom Milgrom view of the firm as an incentive system, Aghion-Tirole conceptualisation of formal and real authority in organisations – and show how they have been embedded in industry and general equilibrium models of FDI to explain the boundaries of global firms.

Suggested Citation

  • Valeria Gattai, 2006. "From the Theory of the Firm to FDI and Internalisation: A Survey," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 65(2), pages 225-262, November.
    • Handle: RePEc:gde:journl:gde_v65_n2_p225-262
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    Cited by:

    1. Valeria Gattai, 2013. "International outsourcing versus FDI under contractual incompleteness," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 60(2), pages 157-186, June.
    2. Frank A.G. den Butter, 2012. "Managing Transaction Costs in the Era of Globalization," Books, Edward Elgar Publishing, number 14748.
    3. Valeria Gattai & Piergiovanna Natale, 2017. "A New Cinderella Story: Joint Ventures And The Property Rights Theory Of The Firm," Journal of Economic Surveys, Wiley Blackwell, vol. 31(1), pages 281-302, February.
    4. Valeria Gattai, 2010. "Firm's intangible assets and multinational activity: Full versus shared ownership," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 19(4), pages 553-589.
    5. Pietro De Ponti & Valeria Gattai, 2022. "Family Firms and Input Procurement: Firm-Level Evidence from Italy," Working Papers 499, University of Milano-Bicocca, Department of Economics, revised Jun 2022.
    6. Chaihuaque, Bruno, 2009. "El enfoque transaccional en los límites de la empresa [The transactional approach in company boundaries]," MPRA Paper 41297, University Library of Munich, Germany, revised 16 Jul 2009.
    7. Lorenzo Casaburi & Valeria Gattai, 2009. "Why FDI? An Empirical Assessment Based on Contractual Incompleteness and Dissipation of Intangible Assets," Working Papers 164, University of Milano-Bicocca, Department of Economics, revised Jul 2009.
    8. Gattai Valeria & Trovato Valentina, 2016. "Estimating Sourcing Premia Using Italian Regional Data," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(2), pages 1029-1067, April.
    9. Ottaviano, Gianmarco & Naghavi, Alireza, 2006. "Outsourcing, Contracts and Innovation Networks," CEPR Discussion Papers 5681, C.E.P.R. Discussion Papers.
    10. Marta Bernasconi & Sara Galetti & Valeria Gattai & Piergiovanna Natale, 2022. "Contract Incompleteness and the Boundaries of the Firm in Times of COVID-19," Journal of Industry, Competition and Trade, Springer, vol. 22(3), pages 371-409, December.
    11. Butter, Frank A.G. den & Wit, Paul, 2006. "Trade and product innovations as sources for productivity increases: an empirical analysis," Serie Research Memoranda 0013, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.

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    More about this item

    Keywords

    FDI; internalisation; integration; outsourcing; theory of the firm;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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