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Vertical Integration and Firm Boundaries : The Evidence

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  • Lafontaine, Francine

    (Stephen M. Ross School of Business, University of Michigan)

  • Slade, Margaret

    (Department of Economics,University of Warwick)

Abstract

Understanding what determines firm boundaries and the choice between interacting in a firm or a market is not only the fundamental concern of the theory of the firm, but it is also one of the most important issues in economics. Data on value added, for example, reveal that in the US, transactions that occur in firms are roughly equal in value to those that occur in markets. The economics profession, however, has devoted much more attention to the workings of markets than to the study of firms, and even less attention to the interface between the two. Nevertheless, since Coase’s (1937) seminal paper on the subject, a rich set of theories has been developed that deal with firm boundaries in vertical or input/output structures. Furthermore, in the last 25 years, empirical evidence that can shed light on those theories has been accumulating.

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Bibliographic Info

Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 799.

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Length: 91 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:wrk:warwec:799

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Keywords: Vertical integration ; firm boundaries ; vertical mergers ; firms versus markets;

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References

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  1. New Survey Paper on Vertical Integration
    by Peter Klein in Organizations and Markets on 2007-09-21 20:27:28
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