Institution-Driven Comparative Advantage, Complex Goods and Organizational Choice
AbstractThe theory of the rm suggests that firms can respond to poor contract enforcement by vertically integrating their production process. The purpose of this paper is to examine whether firms' integration opportunities affect the way institutions determine international trade patterns. We find that vertical integration lessens the impact of a country's ability to enforce contracts on the comparative advantage of complex goods. We also find that countries with good financial institutions export disproportionately more in sectors that produce complex goods and that have a high propensity for vertical integration. In doing so we use a new outcome-based measure of vertical integration propensity and we employ several empirical strategies: cross section, panel and event study analysis. Our results confirm the role of institutions as source of comparative advantage and suggest that this depends not only on the technological characteristics of the goods produced but also on the way firms are able to organize the production process.
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Bibliographic InfoPaper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 2011:10.
Length: 40 pages
Date of creation: 21 Mar 2011
Date of revision:
Contact details of provider:
Postal: Department of Economics, Stockholm, S-106 91 Stockholm, Sweden
Phone: +46 8 16 20 00
Fax: +46 8 16 14 25
Web page: http://www.ne.su.se/
More information through EDIRC
International Trade; Comparative Advantage; Contract Enforcement; Financial Institutions; Vertical Integration;
Other versions of this item:
- Ferguson, Shon & Formai, Sara, 2012. "Institution-Driven Comparative Advantage and Organizational Choice," Working Paper Series 925, Research Institute of Industrial Economics.
- Ferguson, Shon & Formai, Sara, 2011. "Institution-Driven Comparative Advantage, Complex Goods and Organizational Choice," Working Paper Series 879, Research Institute of Industrial Economics.
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- F10 - International Economics - - Trade - - - General
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- G20 - Financial Economics - - Financial Institutions and Services - - - General
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-03-26 (All new papers)
- NEP-CSE-2011-03-26 (Economics of Strategic Management)
- NEP-OPM-2011-03-26 (Open Economy Macroeconomic)
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