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Civic Capital and the Vertical Integration of Service Provision: Evidence from Italy

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  • Matthias Buerker
  • Gaetano Alfredo Minerva

Abstract

This paper studies whether civic capital acts an effective restraint against opportunistic behavior in transactions, looking at the degree of outsourcing to external suppliers of service provision in Italian firms. Our results show that, on average, firms tend to outsource more services where civic capital is higher. Two qualifications apply: the firms that are more heavily influenced are the smaller ones; the effect is particularly pronounced in provinces where formal contract enforcement is more difficult. To address the issue of endogeneity we also instrument the current stock of civic capital by historical variables. We argue that the rise in the propensity to engage in transactions with outside service suppliers is evidence of a decrease in the opportunistic behavior between the parties involved in the transaction.

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File URL: http://www-sre.wu.ac.at/ersa/ersaconfs/ersa13/ERSA2013_paper_01209.pdf
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Bibliographic Info

Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa13p1209.

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Date of creation: Nov 2013
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Handle: RePEc:wiw:wiwrsa:ersa13p1209

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  1. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2000. "The Role of Social Capital in Financial Development," CRSP working papers 511, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  2. Li, Ben & Lu, Yi, 2009. "Geographic concentration and vertical disintegration: Evidence from China," Journal of Urban Economics, Elsevier, vol. 65(3), pages 294-304, May.
  3. Helsley, Robert W. & Strange, William C., 2007. "Agglomeration, opportunism, and the organization of production," Journal of Urban Economics, Elsevier, vol. 62(1), pages 55-75, July.
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  9. Joskow, Paul L, 1985. "Vertical Integration and Long-term Contracts: The Case of Coal-burning Electric Generating Plants," Journal of Law, Economics and Organization, Oxford University Press, vol. 1(1), pages 33-80, Spring.
  10. Guido de Blasio & Giorgio Nuzzo, 2010. "Historical Traditions Of Civicness And Local Economic Development," Journal of Regional Science, Wiley Blackwell, vol. 50(4), pages 833-857.
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  12. Paolo Buonanno & Daniel Montolio & Paolo Vanin, 2006. "Does Social Capital Reduce Crime?," "Marco Fanno" Working Papers 0029, Dipartimento di Scienze Economiche "Marco Fanno".
  13. James Andreoni & John Miller, 2002. "Giving According to GARP: An Experimental Test of the Consistency of Preferences for Altruism," Econometrica, Econometric Society, vol. 70(2), pages 737-753, March.
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  15. Fernando Merino & Diego Rodr�guez Rodr�guez, 2007. "Business services outsourcing by manufacturing firms," Industrial and Corporate Change, Oxford University Press, vol. 16(6), pages 1147-1173, December.
  16. Rocco Macchiavello, 2012. "Financial Development And Vertical Integration: Theory And Evidence," Journal of the European Economic Association, European Economic Association, vol. 10(2), pages 255-289, 04.
  17. 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.
  18. G. A. Minerva & M. Burker, 2011. "Explaining the Size Distribution of Plants: An Approach Based on Civic Capital," Working Papers wp755, Dipartimento Scienze Economiche, Universita' di Bologna.
  19. Colin F. Camerer & Richard H. Thaler, 1995. "Anomalies: Ultimatums, Dictators and Manners," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 209-219, Spring.
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