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How Wide Is the Firm Border?

Author

Listed:
  • Enghin Atalay
  • Ali Hortaçsu
  • Mary Jialin Li
  • Chad Syverson

Abstract

We examine the within- and across-firm shipment decisions of tens of thousands of goods-producing and goods-distributing establishments. This allows us to quantify the normally unobservable forces that determine firm boundaries, that is, which transactions are mediated by ownership control, as opposed to contracts or markets. We find firm boundaries to be an economically significant barrier to trade: having an additional vertically integrated establishment in a given destination ZIP code has the same effect on shipment volumes as a 40% reduction in distance. These effects are larger for high value-to-weight products, faraway destinations, differentiated products, and IT-intensive industries.

Suggested Citation

  • Enghin Atalay & Ali Hortaçsu & Mary Jialin Li & Chad Syverson, 2019. "How Wide Is the Firm Border?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(4), pages 1845-1882.
    • Handle: RePEc:oup:qjecon:v:134:y:2019:i:4:p:1845-1882.
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    File URL: http://hdl.handle.net/10.1093/qje/qjz026
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    Cited by:

    1. Adelaide Baronchelli & Raul Caruso, 2023. "Italian small arms exports: between incentives and international sanctions," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 40(3), pages 1075-1106, October.
    2. Philippe Choné & Laurent Linnemer & Thibaud Vergé, 2021. "Double Marginalization and Vertical Integration," CESifo Working Paper Series 8971, CESifo.
    3. Imbs, Jean & Pauwels, Laurent, 2025. "Measuring foreign exposure," Journal of International Economics, Elsevier, vol. 157(C).
    4. John (Jianqiu) Bai, 2021. "Organizational Form and Trade Liberalization: Plant-Level Evidence," Management Science, INFORMS, vol. 67(12), pages 7755-7784, December.
    5. Johannes Boehm & Jan Sonntag, 2023. "Vertical Integration and Foreclosure: Evidence from Production Network Data," Management Science, INFORMS, vol. 69(1), pages 141-161, January.
    6. Imbs, Jean & Pauwels, Laurent, 2020. "High Order Openness," CEPR Discussion Papers 14653, C.E.P.R. Discussion Papers.
    7. Cheng CHEN & Chang SUN & Hongyong ZHANG & Jiaxu ZHANG, 2023. "Production and Ownership Networks," Discussion papers 23039, Research Institute of Economy, Trade and Industry (RIETI).
    8. Johannes Boehm, 2014. "The Impact of Contract Enforcement Costs on Outsourcing and Aggregate Productivity," 2014 Meeting Papers 340, Society for Economic Dynamics.
    9. Youngho Kang & Jeongmeen Suh, 2022. "Information technology and the spatial reorganization of firms," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(3), pages 674-692, August.
    10. repec:spo:wpmain:info:hdl:2441/1uut5itepl9q5osfl3tj7qatje is not listed on IDEAS
    11. Michele Fioretti & Junnan He & Jorge Tamayo, 2024. "Prices and Concentration: A U-Shape? Theory and Evidence from Renewables," Working Papers hal-04631762, HAL.
    12. repec:spo:wpecon:info:hdl:2441/1uut5itepl9q5osfl3tj7qatje is not listed on IDEAS
    13. Gil, Ricard & Kim, Myongjin, 2021. "Does competition increase quality? Evidence from the US airline industry," International Journal of Industrial Organization, Elsevier, vol. 77(C).
    14. McCully, Brett A., 2024. "Immigrants, legal status, and illegal trade," Journal of International Economics, Elsevier, vol. 152(C).
    15. Adelaide Baronchelli & Raul Caruso & Roberto Ricciuti, 2022. "Trade in Small Arms and Light Weapons: Are embargoes effective?," The World Economy, Wiley Blackwell, vol. 45(5), pages 1336-1361, May.
    16. Garg, Shresth & Ghosh, Pulak & Tan, Brandon Joel, 2023. "Within firm supply chains: Evidence from India," Journal of International Economics, Elsevier, vol. 144(C).
    17. Bartelme, Dominick & Ziv, Oren, 2024. "The internal geography of firms," Journal of International Economics, Elsevier, vol. 148(C).
    18. Davide Del Prete & Armando Rungi, 2020. "Backward and Forward Integration Along Global Value Chains," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(2), pages 263-283, September.
    19. Basker, Emek & Kamal, Fariha, 2021. "Recall and response: Relationship adjustments to adverse information shocks," European Economic Review, Elsevier, vol. 139(C).

    More about this item

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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