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Asymmetric spiders: Supplier heterogeneity and the organization of firms

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  • Nowak, Verena
  • Schwarz, Christian
  • Suedekum, Jens

Abstract

We consider a property rights model of a firm with two heterogeneous suppliers. The headquarters determine the firm's organizational structure, and we analyze which sourcing mode (outsourcing or vertical integration) is chosen for which of the asymmetric inputs. If suppliers' investment choices are strategic complements, the firm may keep the technologically more important input inside its boundaries and outsource the less important supplier. The firm also tends to keep more sophisticated inputs in-house, while choosing an external supplier organization for simpler and for low-cost components. These theoretical predictions are consistent with numerous case studies and recent empirical evidence on the internal organization of firms.

Suggested Citation

  • Nowak, Verena & Schwarz, Christian & Suedekum, Jens, 2014. "Asymmetric spiders: Supplier heterogeneity and the organization of firms," DICE Discussion Papers 141, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  • Handle: RePEc:zbw:dicedp:141
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    References listed on IDEAS

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    6. Gregory Corcos & Delphine M. Irac & Giordano Mion & Thierry Verdier, 2008. "The Determinants of Intra-Firm Trade," Development Working Papers 267, Centro Studi Luca d'Agliano, University of Milano.
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    17. repec:hrv:faseco:4784029 is not listed on IDEAS
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    Cited by:

    1. Nowak, Verena, 2014. "Organizational decisions in multistage production processes," DICE Discussion Papers 169, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

    More about this item

    Keywords

    firm organization; outsourcing; intra-firm trade; property rights approach;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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