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The Firm as a Pool of Factor Complementarities

  • Lindbeck, Assar
  • Snower, Dennis J.

This Paper presents a new approach to the theory of the firm by identifying factor complementarities as central to the determination of the firm’s boundaries. The factor complementarities may take a variety of forms: technological and informational complementarities, as well as economies of scale and scope. We examine the trade-off between the gains from these complementarities and transactions costs. In so doing, we must abandon the standard dichotomy between the determinants of plant size and firm size. The influence of factor complementarities on firm size is examined in partial and general equilibrium frameworks.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4242.

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Date of creation: Feb 2004
Date of revision:
Handle: RePEc:cpr:ceprdp:4242
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  1. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
  2. Lindbeck, Assar & Snower, Dennis J., 1997. "Reorganization of Firms and Labor Market Inequality," Seminar Papers 605, Stockholm University, Institute for International Economic Studies.
  3. repec:oup:qjecon:v:109:y:1994:i:4:p:809-39 is not listed on IDEAS
  4. Bengt Holmstrom, 1981. "Moral Hazard in Teams," Discussion Papers 471, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-95, December.
  6. Mathias Dewatripont & Patrick Bolton, 2004. "The firm as a communication network," ULB Institutional Repository 2013/9599, ULB -- Universite Libre de Bruxelles.
  7. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
  8. repec:tpr:qjecon:v:109:y:1994:i:4:p:809-39 is not listed on IDEAS
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