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Vertical Integration and Distance to Frontier Author info | Abstract | Publisher info | Download info | Related research | Statistics Acemoglu, Daron
Aghion, Philippe
Zilibotti, Fabrizio
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We construct a model where the equilibrium organization of firms changes as an economy approaches the world technology frontier. In vertically integrated firms, owners (managers) have to spend time both on production and innovation activities, and this creates managerial overload, and discourages innovation. Outsourcing of some production activities mitigates the managerial overload, but creates a holdup problem, causing some of the rents of the owners to be dissipated to the supplier. Far from the technology frontier, imitation activities are more important, and vertical integration is preferred. Closer to the frontier, the value of innovation increases, encouraging outsourcing.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
3565.
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Date of creation: Oct 2002Date of revision:
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Keywords: contracts economic growth internal organization of the firm vertical integration Other versions of this item:
Find related papers by JEL classification: L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes O38 - Economic Development, Technological Change, and Growth - - Technological Change - - - Government Policy O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.: Acemoglu, Daron & Zilibotti, Fabrizio, 1999.
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Other versions:
Daron Acemoglu & Philippe Aghion & Fabrizio Zilibotti, 2002.
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references Cited by : (explanations , Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.)
Eiichi Tomiura, 2004.
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