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The Firm as a Pool of Factor Complementarities

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Author Info
Lindbeck, Assar () (Institute for International Economic Studies, Stockholm University)
Snower, Dennis () (Birkbeck College, University of London, CEPR and IZA Bonn)

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Abstract

This paper presents a new approach to the theory of the firm by identifying factor complementarities as central to the determination of the firm’s boundaries. The factor complementarities may take a variety of forms: technological and informational complementarities, as well as economies of scale and scope. We examine the tradeoff between the gains from these complementarities and transactions costs. In so doing, we must abandon the standard dichotomy between the determinants of plant size and firm size. The influence of factor complementarities on firm size is examined in partial and general equilibrium frameworks.

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Publisher Info
Paper provided by Stockholm University, Institute for International Economic Studies in its series Seminar Papers with number 725.

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Length: 17 pages
Date of creation: 10 Jun 2003
Date of revision:
Handle: RePEc:hhs:iiessp:0725

Note: IZA Discussion Paper No 882, Bonn October 2003
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Postal: Institute for International Economic Studies, Stockholm University, S-106 91 Stockholm, Sweden
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Related research
Keywords: firm; complementarities; plant;

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Find related papers by JEL classification:
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence

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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.:
  1. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-95, December. [Downloadable!] (restricted)
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  2. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law & Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
  3. Bolton, Patrick & Dewatripont, Mathias, 1994. "The Firm as a Communication Network," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 809-39, November. [Downloadable!] (restricted)
  4. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August. [Downloadable!] (restricted)
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  5. Lindbeck, Assar & Snower, Dennis J, 1996. "Reorganization of Firms and Labor-Market Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 315-21, May.
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  6. Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 324-340, Autumn. [Downloadable!] (restricted)
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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.)

  1. Werner Hölzl, 2005. "The evolutionary theory of the firm: Routines, complexity and change," Working Papers geewp46, Vienna University of Economics and B.A. Research Group: Growth and Employment in Europe: Sustainability and Competitiveness. [Downloadable!]
  2. Alla Lileeva & Johannes Van Biesebroeck, 2008. "Outsourcing when Investments are Specific and Complementary," NBER Working Papers 14477, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Horst Raff & Michael Ryan, 2006. "Firm-Specific Characteristics and the Timing of Foreign Direct Investment Projects," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  4. Constantinescu, Madalina, 2008. "Knowledge Management through the Lens of Innovation and Labour Productivity in a Knowledge Based Economy," MPRA Paper 8930, University Library of Munich, Germany. [Downloadable!]
    Other versions:
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