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Integration versus Outsourcing in Stable Industry Equilibrium with Communication Networks

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Author Info
Okamoto, Yusuke
Abstract

For the selection of a firm's structure between vertical integration and arm's-length outsourcing, the importance of the thickness of the market had been emphasized in the previous literature. Here we take account of communication networks such as telephone, telex, fax, and the Internet. By doing so, we could illustrate the relationship between communication networks and the make-or-buy decision. With communication network technology differing in each type of firm, both vertically integrated firms and arm's-length outsourcing firms coexist, which was never indicated in the previous literature. However, when common network technology is introduced, such coexistence generically does not occur.

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File URL: http://ir.ide.go.jp/dspace/bitstream/2344/144/1/ARRIDE_Discussion_No.54_Okamoto.pdf
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File Function: First version, 2006
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Paper provided by Institute of Developing Economies, Japan External Trade Organization(JETRO) in its series IDE Discussion Papers with number 54.

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Date of creation: Mar 2006
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Publication status: Published in IDE Discussion Paper. No. 54. 2006.3
Handle: RePEc:jet:dpaper:dpaper54

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Related research
Keywords: Communication networks; Vertical integration; Communication; Network; Industrial management; Telecommunication; 336;

Find related papers by JEL classification:
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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  1. Antràs, Pol & Helpman, Elhanan, 2004. "Global Sourcing," CEPR Discussion Papers 4170, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. Richard G. Harris, 1995. "Trade and Communication Costs," Canadian Journal of Economics, Canadian Economics Association, vol. 28(s1), pages 46-75, November.
  3. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-58, December. [Downloadable!] (restricted)
    Other versions:
  4. Gene M. Grossman & Elhanan Helpman, 2005. "Outsourcing in a Global Economy," Review of Economic Studies, Blackwell Publishing, vol. 72(1), pages 135-159, 01. [Downloadable!] (restricted)
    Other versions:
  5. 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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  6. John McLaren, 2000. ""Globalization" and Vertical Structure," American Economic Review, American Economic Association, vol. 90(5), pages 1239-1254, December. [Downloadable!] (restricted)
  7. Robert C. Feenstra & Gordon H. Hanson, 2004. "Ownership and Control in Outsourcing to China: Estimating the Property-Rights Theory of the Firm," NBER Working Papers 10198, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Jose Campa & Linda S. Goldberg, 1997. "The Evolving External Orientation of Manufacturing Industries: Evidence from Four Countries," NBER Working Papers 5919, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Gene M. Grossman & Elhanan Helpman, 2002. "Integration Versus Outsourcing In Industry Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 85-120, February. [Downloadable!] (restricted)
  10. Gene M. Grossman & Elhanan Helpman, 2003. "Outsourcing Versus FDI in Industry Equilibrium," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 317-327, 04/05. [Downloadable!] (restricted)
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  11. Pol Antràs, 2003. "Firms, Contracts, and Trade Structure," NBER Working Papers 9740, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Feenstra, Robert C, 1998. "Integration of Trade and Disintegration of Production in the Global Economy," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 31-50, Fall. [Downloadable!] (restricted)
    Other versions:
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