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The Theories of International Outsourcing and Integration : A Theoretical Overview from the Perspective of Organizational Economics

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  • Hideshi Itoh

    (Hitotsubashi University)

Abstract

The purpose of this essay is to provide an overview of the theories of the vertical firm boundaries from a viewpoint of a theorist whose field of specialization is organizational economics. I offer several testable theoretical hypotheses (with a few relevant empirical studies in the fields outside international economics) hoping future research will test them in the context of international vertical relationships in East Asia, and provide theorists like me with new evidence and evaluations, both positive and negative. Such interaction is crucial for our further understanding of multinational firms strategies in East Asia. I first summarize two approaches to the boundaries of the firm, the transaction costs approach and the property rights approach. To differentiate from those recent survey papers by scholars of international trade which mostly focus on these approaches, I put more emphasis on alternative theories, since in the field of organizational economics, the property rights approach to the firm boundaries has been criticized and alternative theories have been developing.

Suggested Citation

  • Hideshi Itoh, 2006. "The Theories of International Outsourcing and Integration : A Theoretical Overview from the Perspective of Organizational Economics," Microeconomics Working Papers 21891, East Asian Bureau of Economic Research.
  • Handle: RePEc:eab:microe:21891
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    File URL: http://www.eaber.org/node/21891
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    References listed on IDEAS

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    1. George Baker & Robert Gibbons & Kevin J. Murphy, 2002. "Relational Contracts and the Theory of the Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 39-84.
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    6. Jed Devaro & Fidan Ana Kurtulus, 2010. "An Empirical Analysis of Risk, Incentives and the Delegation of Worker Authority," ILR Review, Cornell University, ILR School, vol. 63(4), pages 641-661, July.
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    10. 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.
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    12. Holmstrom, Bengt & Milgrom, Paul, 1994. "The Firm as an Incentive System," American Economic Review, American Economic Association, vol. 84(4), pages 972-991, September.
    13. Shelanski, Howard A & Klein, Peter G, 1995. "Empirical Research in Transaction Cost Economics: A Review and Assessment," Journal of Law, Economics, and Organization, Oxford University Press, vol. 11(2), pages 335-361, October.
    14. Canice Prendergast, 2002. "The Tenuous Trade-off between Risk and Incentives," Journal of Political Economy, University of Chicago Press, vol. 110(5), pages 1071-1102, October.
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    17. repec:hrv:faseco:4784029 is not listed on IDEAS
    18. Michael D. Whinston, 2003. "On the Transaction Cost Determinants of Vertical Integration," Journal of Law, Economics, and Organization, Oxford University Press, vol. 19(1), pages 1-23, April.
    19. Barbara Spencer, 2005. "International outsourcing and incomplete contracts," Canadian Journal of Economics, Canadian Economics Association, vol. 38(4), pages 1107-1135, November.
    20. Maija Halonen, 2002. "Reputation And The Allocation Of Ownership," Economic Journal, Royal Economic Society, vol. 112(481), pages 539-558, July.
    21. Hideshi Itoh & Hodaka Morita, 2006. "Formal Contracts, Relational Contracts, and the Holdup Problem," CESifo Working Paper Series 1786, CESifo Group Munich.
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    Cited by:

    1. Fukao, Kyoji & Okubo, Toshihiro, 2011. "Why Has the Border Effect in the Japanese Machinery Sectors Declined?: The Role of Business Networks in East Asian Machinery Trade," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 26, pages 651-671.

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