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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, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    • Handle: RePEc:zbw:dicedp:141
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    References listed on IDEAS

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    Cited by:

    1. Berlingieri, Giuseppe & Pisch, Frank & Steinwender, Claudia, 2018. "Organizing global supply chains: input costs shares and vertical integration," LSE Research Online Documents on Economics 91706, London School of Economics and Political Science, LSE Library.
    2. Greil, Stefan & Schwarz, Christian & Stein, Stefan, "undated". "Fairness and the Arm’s Length Principle in a Digital Economy [Fairness und der Fremdvergleichsgrundsatz in der digitalen Ökonomie]," Duesseldorf Working Papers in Applied Management and Economics 42, Duesseldorf University of Applied Sciences.
    3. Giuseppe Berlingieri & Frank Pisch & Claudia Steinwender, 2021. "Organizing Global Supply Chains: Input-Output Linkages and Vertical Integration," Journal of the European Economic Association, European Economic Association, vol. 19(3), pages 1816-1852.
    4. Nowak, Verena, 2014. "Organizational Decisions in Multistage Production Processes," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100613, Verein für Socialpolitik / German Economic Association.

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    More about this item

    Keywords

    firm organization; outsourcing; intra-firm trade; property rights approach;
    All these keywords.

    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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