IDEAS home Printed from https://ideas.repec.org/p/trn/utwprg/2015-05.html
   My bibliography  Save this paper

Firm boundaries in Transition countries. The influence of technological and institutional links

Author

Listed:
  • Maria Litvinova
  • Maria Luigia Segnana

Abstract

Using BEEPS cross-section data for one of the worldÕs largest developing economy, transition countries, this paper aims at identifying the impact of technology intensity and contracting institutions on firmsÕ organizational forms, in particular vertical integration. Using the theoretical predictions about organizational choices drawn from the incomplete contracting models, we test the impacts of technological and institutional determinants. The results show that technological and institutional forces are oppositely directed. The improvement of contracting institutions weakens the propensity for vertical integration while the influence of technological complexity tends to increase it. Moreover, technological intensive countries and industries show the prevalence of vertically integrated organizational modes, a result enhanced by poorly functioning contracting institutions. Different impacts are also found for European and Non European transition countries. When these results are examined in light of the increasing exposure to trade, they show that this has reinforced rather that weakened the historical tendency towards vertical integration.

Suggested Citation

  • Maria Litvinova & Maria Luigia Segnana, 2015. "Firm boundaries in Transition countries. The influence of technological and institutional links," DEM Working Papers 2015/05, Department of Economics and Management.
    • Handle: RePEc:trn:utwprg:2015/05
    as

    Download full text from publisher

    File URL: http://web.unitn.it/files/download/39673/demwp2015_05.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Johnson, Simon & Kaufmann, Daniel & McMillan, John & Woodruff, Christopher, 2000. "Why do firms hide? Bribes and unofficial activity after communism," Journal of Public Economics, Elsevier, vol. 76(3), pages 495-520, June.
    2. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, June.
    3. John McLaren, 2000. ""Globalization" and Vertical Structure," American Economic Review, American Economic Association, vol. 90(5), pages 1239-1254, December.
    4. Martin Raiser & Alan Rousso & Franklin Steves, 2004. "Trust in Transition: Cross-country and Firm Evidence," Others 0401007, University Library of Munich, Germany.
    5. Pol Antras & Davin Chor & Thibault Fally & Russell Hillberry, 2012. "Measuring the Upstreamness of Production and Trade Flows," American Economic Review, American Economic Association, vol. 102(3), pages 412-416, May.
    6. Pol Antràs & C. Fritz Foley, 2015. "Poultry in Motion: A Study of International Trade Finance Practices," Journal of Political Economy, University of Chicago Press, vol. 123(4), pages 853-901.
    7. Gelbuda, Modestas & Meyer, Klaus E. & Delios, Andrew, 2008. "International business and institutional development in Central and Eastern Europe," Journal of International Management, Elsevier, vol. 14(1), pages 1-11, March.
    8. Mateut, Simona, 2014. "Reverse trade credit or default risk? Explaining the use of prepayments by firms," Journal of Corporate Finance, Elsevier, vol. 29(C), pages 303-326.
    9. Alesina, Alberto & La Ferrara, Eliana, 2002. "Who trusts others?," Journal of Public Economics, Elsevier, vol. 85(2), pages 207-234, August.
    10. Pradeep Mitra, 2008. "Innovation, Inclusion, and Integration : From Transition to Convergence in Eastern Europe and the Former Soviet Union," World Bank Publications - Books, The World Bank Group, number 6475, December.
    11. Borko Handjiski, 2009. "Investment Matters : The Role and Patterns of Investment in Southeast Europe," World Bank Publications - Books, The World Bank Group, number 5920, December.
    12. Seru, Amit, 2014. "Firm boundaries matter: Evidence from conglomerates and R&D activity," Journal of Financial Economics, Elsevier, vol. 111(2), pages 381-405.
    13. Vladimir Dvoracek, 2009. "Vertical Integration and Sunk Capital in Transition Economies," Oxford Development Studies, Taylor & Francis Journals, vol. 37(1), pages 19-32.
    14. Nauro F. Campos & Abrizio Coricelli, 2002. "Growth in Transition: What We Know, What We Don't, and What We Should," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 793-836, September.
    15. Daron Acemoglu & Simon Johnson & Todd Mitton, 2009. "Determinants of Vertical Integration: Financial Development and Contracting Costs," Journal of Finance, American Finance Association, vol. 64(3), pages 1251-1290, June.
    16. Hans van Ees & Reinhard Bachmann, 2006. "Transition economies and trust building: a network perspective on EU enlargement," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 30(6), pages 923-939, November.
    17. Simon Johnson & John McMillan, 2002. "Courts and Relational Contracts," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 18(1), pages 221-277, April.
    18. Utku Teksoz, 2008. "Trust in Transition: Cross-Country and Firm Evidence," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 24(2), pages 407-433, October.
    19. Daron Acemoglu & Francisco A. Gallego & James A. Robinson, 2014. "Institutions, Human Capital, and Development ," Annual Review of Economics, Annual Reviews, vol. 6(1), pages 875-912, August.
    20. Pol Antràs, 2003. "Firms, Contracts, and Trade Structure," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(4), pages 1375-1418.
    21. Alexei Izyumov & John Vahaly, 2006. "New capital accumulation in transition economies: implications for capital-labor and capital-output ratios," Economic Change and Restructuring, Springer, vol. 39(1), pages 63-83, June.
    22. Aron, Janine, 2000. "Growth and Institutions: A Review of the Evidence," The World Bank Research Observer, World Bank, vol. 15(1), pages 99-135, February.
    23. Du, Julan & Lu, Yi & Tao, Zhigang, 2012. "Contracting institutions and vertical integration: Evidence from China’s manufacturing firms," Journal of Comparative Economics, Elsevier, vol. 40(1), pages 89-107.
    24. Berglöf, Erik & Bruynooghe, Lise & Harmgart, Heike & Sanfey, Peter & Schweiger, Helena & Zettelmeyer, Jeromin, 2010. "European Transition at Twenty," WIDER Working Paper Series 091, World Institute for Development Economic Research (UNU-WIDER).
    25. Olav Sorenson, 2003. "Interdependence and Adaptability: Organizational Learning and the Long--Term Effect of Integration," Management Science, INFORMS, vol. 49(4), pages 446-463, April.
    26. Gene M. Grossman & Elhanan Helpman, 2002. "Integration versus Outsourcing in Industry Equilibrium," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(1), pages 85-120.
    27. Teraji, Shinji, 2008. "Property rights, trust, and economic performance," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(4), pages 1584-1596, August.
    28. Frédéric Dalsace & Michael J. Leiblein & Jeffrey J. Reuer, 2002. "Do make or buy decisions matter? The influence of organizational governance on technological performance," Post-Print hal-00457649, HAL.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Laura Alfaro & Paola Conconi & Harald Fadinger & Andrew F. Newman, 2010. "Do Prices Determine Vertical Integration? Evidence from Trade Policy," Harvard Business School Working Papers 10-060, Harvard Business School, revised May 2013.
    2. Stiebale, Joel & Vencappa, Dev, 2022. "Import competition and vertical integration: Evidence from India," Journal of Development Economics, Elsevier, vol. 155(C).
    3. Newman, Andrew & Conconi, Paola & Alfaro, Laura & Fadinger, Harald, 2010. "Trade Policy and Firm Boundaries," CEPR Discussion Papers 7899, C.E.P.R. Discussion Papers.
    4. Abban, Stanley, 2020. "Institutions, Infrastructure and East African Community Membership of Burundi and Rwanda on Trade," MPRA Paper 100654, University Library of Munich, Germany, revised 10 May 2020.
    5. Christopher Hansman & Jonas Hjort & Gianmarco León-Ciliotta & Matthieu Teachout, 2020. "Vertical Integration, Supplier Behavior, and Quality Upgrading among Exporters," Journal of Political Economy, University of Chicago Press, vol. 128(9), pages 3570-3625.
    6. Laura Alfaro & Nicholas Bloom & Paola Conconi & Harald Fadinger & Patrick Legros & Andrew F. Newman & Raffaella Sadun & John Van Reenen, 2017. "Come Together: Firm Boundaries and Delegation," Harvard Business School Working Papers 18-051, Harvard Business School, revised May 2019.
    7. Conconi, Paola & Legros, Patrick & Newman, Andrew F., 2012. "Trade liberalization and organizational change," Journal of International Economics, Elsevier, vol. 86(2), pages 197-208.
    8. Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Trading Tasks: A Simple Theory of Offshoring," American Economic Review, American Economic Association, vol. 98(5), pages 1978-1997, December.
    9. Ferguson, Shon & Formai, Sara, 2013. "Institution-driven comparative advantage and organizational choice," Journal of International Economics, Elsevier, vol. 90(1), pages 193-200.
    10. Daron Acemoglu & Philippe Aghion & Rachel Griffith & Fabrizio Zilibotti, 2010. "Vertical Integration and Technology: Theory and Evidence," Journal of the European Economic Association, MIT Press, vol. 8(5), pages 989-1033, September.
    11. Ma, Yue & Qu, Baozhi & Zhang, Yifan, 2010. "Judicial quality, contract intensity and trade: Firm-level evidence from developing and transition countries," Journal of Comparative Economics, Elsevier, vol. 38(2), pages 146-159, June.
    12. Gregory Corcos & Delphine M. Irac & Giordano Mion & Thierry Verdier, 2013. "The Determinants of Intrafirm Trade: Evidence from French Firms," The Review of Economics and Statistics, MIT Press, vol. 95(3), pages 825-838, July.
    13. Carsten Eckel, 2009. "International trade, flexible manufacturing, and outsourcing," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 42(4), pages 1449-1472, November.
    14. Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," Journal of Economic Literature, American Economic Association, vol. 44(3), pages 589-630, September.
    15. Michelle Albert Vachris & Justin P. Isaacs, 2017. "The Role of Cultural Values in the Formation and Survival of Pro-Growth Institutions," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 32(Spring 20), pages 89-113.
    16. Wolfgang Keller & Stephen Ross Yeaple, 2013. "The Gravity of Knowledge," American Economic Review, American Economic Association, vol. 103(4), pages 1414-1444, June.
    17. Johannes Boehm, 2014. "The Impact of Contract Enforcement Costs on Outsourcing and Aggregate Productivity," 2014 Meeting Papers 340, Society for Economic Dynamics.
    18. Dermot Leahy & Catia Montagna, 2011. "Economising, Strategising and the Decision to Outsource," Discussion Papers 11/17, University of Nottingham, GEP.
    19. Puga, Diego & Trefler, Daniel, 2010. "Wake up and smell the ginseng: International trade and the rise of incremental innovation in low-wage countries," Journal of Development Economics, Elsevier, vol. 91(1), pages 64-76, January.
    20. repec:hal:spmain:info:hdl:2441/185h5h2nvv9lqr7nmeddt9uu5l is not listed on IDEAS
    21. Patrik Karpaty & Patrik Gustavsson Tingvall, 2015. "Offshoring and Home Country R&D," The World Economy, Wiley Blackwell, vol. 38(4), pages 655-676, April.

    More about this item

    Keywords

    Integration; Transition Countries; Contracting Institutions; Technology; Trust;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • P52 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:trn:utwprg:2015/05. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: roberto.gabriele@unitn.it (email available below). General contact details of provider: https://edirc.repec.org/data/detreit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.