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How Wide Is the Firm Border?

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  • Enghin Atalay
  • Ali Hortacsu
  • 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 percent reduction in distance. These effects are larger for high value-to-weight products, for faraway destinations, for differentiated products, and for IT-intensive industries.

Suggested Citation

  • Enghin Atalay & Ali Hortacsu & Mary Jialin Li & Chad Syverson, 2019. "How Wide Is the Firm Border?," Working Papers 19-37, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpwp:19-37
    DOI: https://doi.org/10.21799/frbp.wp.2019.37
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    Cited by:

    1. Johannes Boehm & Jan Sonntag, 2023. "Vertical Integration and Foreclosure: Evidence from Production Network Data," Management Science, INFORMS, vol. 69(1), pages 141-161, January.
    2. Johannes Boehm, 2014. "The Impact of Contract Enforcement Costs on Outsourcing and Aggregate Productivity," 2014 Meeting Papers 340, Society for Economic Dynamics.
    3. 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.
    4. Philippe Choné & Laurent Linnemer & Thibaud Vergé, 2021. "Double Marginalization and Vertical Integration," CESifo Working Paper Series 8971, CESifo.
    5. Jean Imbs & Laurent L. Pauwels, 2020. "High Order Openness," Working Papers 20200047, New York University Abu Dhabi, Department of Social Science, revised Jun 2020.
    6. John (Jianqiu) Bai, 2021. "Organizational Form and Trade Liberalization: Plant-Level Evidence," Management Science, INFORMS, vol. 67(12), pages 7755-7784, December.
    7. 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.
    8. repec:hal:spmain:info:hdl:2441/44gofgf80399mp5fq5q50vv5t6 is not listed on IDEAS
    9. CHEN Cheng & SUN Chang & ZHANG Hongyong, 2023. "Production and Ownership Networks," Discussion papers 23039, Research Institute of Economy, Trade and Industry (RIETI).
    10. 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.
    11. Basker, Emek & Kamal, Fariha, 2021. "Recall and response: Relationship adjustments to adverse information shocks," European Economic Review, Elsevier, vol. 139(C).
    12. Gil, Ricard & Kim, Myongjin, 2021. "Does competition increase quality? Evidence from the US airline industry," International Journal of Industrial Organization, Elsevier, vol. 77(C).
    13. Garg, Shresth & Ghosh, Pulak & Tan, Brandon Joel, 2023. "Within firm supply chains: Evidence from India," Journal of International Economics, Elsevier, vol. 144(C).
    14. repec:hal:spmain:info:hdl:2441/185h5h2nvv9lqr7nmeddt9uu5l is not listed on IDEAS
    15. 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.
    16. repec:hal:wpspec:info:hdl:2441/1uut5itepl9q5osfl3tj7qatje is not listed on IDEAS
    17. repec:hal:spmain:info:hdl:2441/1uut5itepl9q5osfl3tj7qatje is not listed on IDEAS
    18. repec:hal:wpspec:info:hdl:2441/44gofgf80399mp5fq5q50vv5t6 is not listed on IDEAS

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    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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