Firms' organizational modes with productivity heterogeneity, demand uncertainty and production capacity
AbstractThis paper investigates how firms' demand uncertainty with capacity constraints and their productivity heterogeneity affect their making-or-buying organizational choices in a general equilibrium framework with incomplete contracts. It shows that a final-good producer may adopt integrating a part of the production of its intermediate input in-house and outsource it at arm's length domestically or abroad simultaneously. Moreover, Five organizational modes, exiting the market, outsourcing in the North, outsourcing in the South, integrating and outsourcing in the North simultaneously, and integrating in the North and outsourcing in the South simultaneously, in turn occur with increase of firm-level productivity, as well as its demand uncertainty. Influences of uncertainty and productivity on prevalence of various organizational modes are also explored.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 35667.
Date of creation: 22 Jun 2011
Date of revision:
Uncertainty; organizational mode; productivity heterogeneity; incomplete contract; outsourcing; integration;
Find related papers by JEL classification:
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-01-10 (All new papers)
- NEP-BEC-2012-01-10 (Business Economics)
- NEP-COM-2012-01-10 (Industrial Competition)
- NEP-CSE-2012-01-10 (Economics of Strategic Management)
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