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Civic Capital and the Vertical Integration of Service Provision: Evidence from Italy

Listed author(s):
  • Matthias Buerker
  • Gaetano Alfredo Minerva

This paper studies whether civic capital acts an effective restraint against opportunistic behavior in transactions, looking at the degree of outsourcing to external suppliers of service provision in Italian firms. Our results show that, on average, firms tend to outsource more services where civic capital is higher. Two qualifications apply: the firms that are more heavily influenced are the smaller ones; the effect is particularly pronounced in provinces where formal contract enforcement is more difficult. To address the issue of endogeneity we also instrument the current stock of civic capital by historical variables. We argue that the rise in the propensity to engage in transactions with outside service suppliers is evidence of a decrease in the opportunistic behavior between the parties involved in the transaction.

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File URL: http://www-sre.wu.ac.at/ersa/ersaconfs/ersa13/ERSA2013_paper_01209.pdf
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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa13p1209.

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Date of creation: Nov 2013
Handle: RePEc:wiw:wiwrsa:ersa13p1209
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References listed on IDEAS
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  1. Gene M. Grossman & Elhanan Helpman, 2002. "Integration versus Outsourcing in Industry Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 85-120.
  2. Thomas J. Holmes, 1999. "Localization Of Industry And Vertical Disintegration," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 314-325, May.
  3. Armin Falk & Urs Fischbacher, "undated". "A Theory of Reciprocity," IEW - Working Papers 006, Institute for Empirical Research in Economics - University of Zurich.
  4. Paolo Buonanno & Daniel Montolio & Paolo Vanin, 2006. "Does Social Capital Reduce Crime?," Working Papers (-2012) 0605, University of Bergamo, Department of Economics.
  5. Chen, Yongmin, 2000. "Promises, Trust, and Contracts," Journal of Law, Economics and Organization, Oxford University Press, vol. 16(1), pages 209-32, April.
  6. Fernando Merino & Diego Rodríguez Rodríguez, 2007. "Business services outsourcing by manufacturing firms," Industrial and Corporate Change, Oxford University Press, vol. 16(6), pages 1147-1173, December.
  7. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2004. "The Role of Social Capital in Financial Development," American Economic Review, American Economic Association, vol. 94(3), pages 526-556, June.
  8. Guido de Blasio & Giorgio Nuzzo, 2010. "Historical Traditions Of Civicness And Local Economic Development," Journal of Regional Science, Wiley Blackwell, vol. 50(4), pages 833-857.
  9. Lafontaine, Francine & Slade, Margaret, 2007. "Vertical Integration and Firm Boundaries : The Evidence," The Warwick Economics Research Paper Series (TWERPS) 799, University of Warwick, Department of Economics.
  10. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2010. "Civic Capital as the Missing Link," NBER Working Papers 15845, National Bureau of Economic Research, Inc.
  11. Ernst Fehr & Klaus M. Schmidt, "undated". "A Theory of Fairness, Competition and Cooperation," IEW - Working Papers 004, Institute for Empirical Research in Economics - University of Zurich.
  12. Yukako Ono, 2002. "Outsourcing business services and the role of central administrative offices," Working Paper Series WP-02-01, Federal Reserve Bank of Chicago.
  13. Helsley, Robert W. & Strange, William C., 2007. "Agglomeration, opportunism, and the organization of production," Journal of Urban Economics, Elsevier, vol. 62(1), pages 55-75, July.
  14. James Andreoni & John Miller, 2002. "Giving According to GARP: An Experimental Test of the Consistency of Preferences for Altruism," Econometrica, Econometric Society, vol. 70(2), pages 737-753, March.
  15. G. A. Minerva & M. Burker, 2011. "Explaining the Size Distribution of Plants: An Approach Based on Civic Capital," Working Papers wp755, Dipartimento Scienze Economiche, Universita' di Bologna.
  16. Colin F. Camerer & Richard H. Thaler, 1995. "Anomalies: Ultimatums, Dictators and Manners," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 209-219, Spring.
  17. Joskow, Paul L, 1985. "Vertical Integration and Long-term Contracts: The Case of Coal-burning Electric Generating Plants," Journal of Law, Economics and Organization, Oxford University Press, vol. 1(1), pages 33-80, Spring.
  18. Rocco Macchiavello, 2012. "Financial Development And Vertical Integration: Theory And Evidence," Journal of the European Economic Association, European Economic Association, vol. 10(2), pages 255-289, 04.
  19. Li, Ben & Lu, Yi, 2009. "Geographic concentration and vertical disintegration: Evidence from China," Journal of Urban Economics, Elsevier, vol. 65(3), pages 294-304, May.
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