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Causes of subcontracting: Evidence from panel data on construction firms

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  • Manuel González
  • Benito Arruñada

    ()

  • Alberto Fernández

Abstract

This paper examines factors explaining subcontracting decisions in the construction industry. Rather than the more common cross-sectional analyses, we use panel data to evaluate the influence of all relevant variables. We design and use a new index of the closeness to small numbers situations to estimate the extent of hold-up problems. Results show that as specificity grows, firms tend to subcontract less. The opposite happens when output heterogeneity and the use of intangible assets and capabilities increase. Neither temporary shortage of capacity nor geographical dispersion of activities seem to affect the extent of subcontracting. Finally, proxies for uncertainty do not show any clear effect.

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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 428.

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Date of creation: Nov 1999
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Handle: RePEc:upf:upfgen:428

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Web page: http://www.econ.upf.edu/

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Keywords: Intangible assets; monitoring costs; specificity; subcontracting; vertical integration; uncertainty;

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Citations

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Cited by:
  1. Andrabi, Tahir & Ghatak, Maitreesh & Khwaja, Asim Ijaz, 2006. "Subcontractors for tractors: Theory and evidence on flexible specialization, supplier selection, and contracting," Journal of Development Economics, Elsevier, vol. 79(2), pages 273-302, April.
  2. Francine Lafontaine & Margaret Slade, 2007. "Vertical Integration and Firm Boundaries: The Evidence," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 629-685, September.
  3. Brahm, Francisco & Tarziján, Jorge, 2012. "The impact of complexity and managerial diseconomies on hierarchical governance," Journal of Economic Behavior & Organization, Elsevier, vol. 84(2), pages 586-599.
  4. Renault, Régis & Ma, Ching-to Albert & Alger, Ingela, 2012. "Experience Benefits and Firm Organization," Economics Papers from University Paris Dauphine 123456789/12408, Paris Dauphine University.
  5. Erol Taymaz & Yilmaz Kilicaslan, 2005. "Determinants of subcontracting and regional development: An empirical study on Turkish textile and engineering industries," Regional Studies, Taylor & Francis Journals, vol. 39(5), pages 633-645.
  6. Yvan Dufeu, 2008. "Déterminants du choix d’intégration et de désintégration verticale des entreprises," Revue Finance Contrôle Stratégie, revues.org, vol. 11(1), pages 131-154, March.
  7. Møllgaard, H. Peter & Lorentzen, Jochen, 2002. "EXCLUSIVE SAFEGUARDS AND TECHNOLOGY TRANSFER: Subcontracting Agreements in Eastern Europe’s Car Component Industry," Working Papers 10-2002, Copenhagen Business School, Department of Economics.
  8. Arrighetti, Alessandro & Landini, Fabio & Lasagni, Andrea, 2014. "Intangible assets and firm heterogeneity: Evidence from Italy," Research Policy, Elsevier, vol. 43(1), pages 202-213.
  9. Bigelow, Lyda S. & Argyres, Nicholas, 2008. "Transaction costs, industry experience and make-or-buy decisions in the population of early U.S. auto firms," Journal of Economic Behavior & Organization, Elsevier, vol. 66(3-4), pages 791-807, June.
  10. Luigi Pascali, 2009. "Contract Incompleteness, Globalization and Vertical Structure: an Empirical Analysis," Boston College Working Papers in Economics 727, Boston College Department of Economics.
  11. Erol Taymaz & Yilmaz Kilicaslan, 2001. "Subcontracting dynamics and economic development: A study on textile and engineering industries," ERC Working Papers 0108, ERC - Economic Research Center, Middle East Technical University, revised Aug 2001.
  12. Joan Ramon Rosés, 2005. "Subcontracting and vertical integration in the Spanish cotton industry," Economics Working Papers 816, Department of Economics and Business, Universitat Pompeu Fabra.
  13. Benito Arruñada, 2000. "The role of institutions in the contractual process," Economics Working Papers 521, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 2003.
  14. Chiara Franco & Francesco Rentocchini & Giuseppe Vittucci Marzetti, 2008. "Why do firms invest abroad? An analysis of the motives underlying Foreign Direct Investments," Department of Economics Working Papers 0817, Department of Economics, University of Trento, Italia.
  15. Ulrike Muehlberger, 2005. "Hierarchies, relational contracts and new forms of outsourcing," ICER Working Papers 22-2005, ICER - International Centre for Economic Research.

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