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The Role of Agglomeration and Technology in Shaping Firm Strategy and Organization

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  • Giulio Cainelli

    (Università degli Studi di Bari)

  • Donato Iacobucci

    (Università Politecnica delle Marche)

Abstract

Over the last few years a growing number of contributions have shown that the presence of business groups, i.e. sets of firms legally distinct but belonging to the same owner(s), is significant. From a theoretical point of view, this presence poses the question of whether the group or the single legal unit should be considered as the elementary unit in economic analysis: i.e., what is generally meant in microeconomic theory by ‘firm’. In this paper we consider the group as the appropriate unit to delimit the firm’s boundary, i.e. as the ‘observed’ organizational form adopted by firms when they grow in size. Starting from this hypothesis, the main aim of this paper is to analyse the role of structural variables, such as spatial agglomeration and technology, in determining some features of business groups’ strategy and organization. Specifically, the analysis concerns the presence and organizational specificity of business groups based on their membership of industrial districts (as a proxy for spatial agglomeration) and to the role of spatial agglomeration and technology in vertical integration strategies. To conduct the analysis, we take advantage of a new and large data-set at firm and business group level, recently developed by ISTAT (the Italian National Statistical Institute). The data-set, referring to 2001, covers all manufacturing firms organized as joint-stock companies.

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Bibliographic Info

Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2006.43.

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Date of creation: Mar 2006
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Handle: RePEc:fem:femwpa:2006.43

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Keywords: Business Groups; Agglomeration; Technology; Organisation and Strategy;

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References

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  1. Francesco Brioschi & Maria Sole Brioschi & Giulio Cainelli, 2002. "From the industrial district to the district group: An insight into the evolution of capitalism in italy1," Regional Studies, Taylor & Francis Journals, vol. 36(9), pages 1037-1052.
  2. Duranton, Gilles & Puga, Diego, 2000. "Nursery Cities: Urban Diversity, Process Innovation, and the Life-Cycle of Products," CEPR Discussion Papers 2376, C.E.P.R. Discussion Papers.
  3. Stuart S. Rosenthal & William C. Strange, 1999. "Geography, Industrial Organization, and Agglomeration," Center for Policy Research Working Papers 14, Center for Policy Research, Maxwell School, Syracuse University.
  4. Glaeser, Edward L & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1992. "Growth in Cities," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1126-52, December.
    • Glaeser, Edward Ludwig & Kallal, Hedi D. & Scheinkman, Jose A. & Shleifer, Andrei, 1992. "Growth in Cities," Scholarly Articles 3451309, Harvard University Department of Economics.
    • Edward L. Glaeser & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1991. "Growth in Cities," NBER Working Papers 3787, National Bureau of Economic Research, Inc.
  5. Michael D. Whinston, 2001. "Assessing the Property Rights and Transaction-Cost Theories of Firm Scope," American Economic Review, American Economic Association, vol. 91(2), pages 184-188, May.
  6. Daron Acemoglu & Philippe Aghion & Rachel Griffith & Fabrizio Zilibotti, 2007. "Vertical Integration and Technology: Theory and Evidence," IEW - Working Papers 342, Institute for Empirical Research in Economics - University of Zurich.
  7. Jacquemin, Alexis P & Berry, Charles H, 1979. "Entropy Measure of Diversification and Corporate Growth," Journal of Industrial Economics, Wiley Blackwell, vol. 27(4), pages 359-69, June.
  8. Duranton, Gilles & Puga, Diego, 2004. "Micro-foundations of urban agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 48, pages 2063-2117 Elsevier.
  9. Teece, David J. & Rumelt, Richard & Dosi, Giovanni & Winter, Sidney, 1994. "Understanding corporate coherence : Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 23(1), pages 1-30, January.
  10. Heitor Almeida & Daniel Wolfenzon, 2005. "A Theory of Pyramidal Ownership and Family Business Groups," NBER Working Papers 11368, National Bureau of Economic Research, Inc.
  11. Goto, Akira, 1982. "Business groups in a market economy," European Economic Review, Elsevier, vol. 19(1), pages 53-70.
  12. Giulio Cainelli & Riccardo Leoncini, 1999. "Externalities and long-term local industrial development. Some empirical evidence from Italy," Revue d'Économie Industrielle, Programme National Persée, vol. 90(1), pages 25-39.
  13. Giulio Cainelli & Donato Iacobucci & Enrica Morganti, 2004. "Spatial agglomeration and business groups: new evidence from Italian industrial districts," ERSA conference papers ersa04p402, European Regional Science Association.
  14. Fan, Joseph P H & Lang, Larry H P, 2000. "The Measurement of Relatedness: An Application to Corporate Diversification," The Journal of Business, University of Chicago Press, vol. 73(4), pages 629-60, October.
  15. Ottati, Gabi Dei, 1994. "Trust, Interlinking Transactions and Credit in the Industrial District," Cambridge Journal of Economics, Oxford University Press, vol. 18(6), pages 529-46, December.
  16. Donato Iacobucci, 2002. "Explaining business groups started by habitual entrepreneurs in the Italian manufacturing sector," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 14(1), pages 31-47, January.
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