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Asymmetric spiders: Supplier heterogeneity and the organization of firms

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

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.

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Paper provided by Düsseldorf Institute for Competition Economics (DICE), University of Düsseldorf in its series DICE Discussion Papers with number 141.

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Date of creation: 2014
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Handle: RePEc:zbw:dicedp:141
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  1. Schwarz, Christian & Suedekum, Jens, 2013. "Global sourcing of complex production processes," DICE Discussion Papers 125, Düsseldorf Institute for Competition Economics (DICE), University of Düsseldorf.
  2. Pol Antràs, 2003. "Firms, Contracts, and Trade Structure," NBER Working Papers 9740, National Bureau of Economic Research, Inc.
  3. Fabrice Defever & Farid Toubal, 2013. "Productivity, relationship-specific inputs and the sourcing modes of multinationals," PSE - Labex "OSE-Ouvrir la Science Economique" hal-00860203, HAL.
  4. Sergiu Hart, 2006. "Shapley Value," Discussion Paper Series dp421, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
  5. Antràs, Pol & Helpman, Elhanan, 2004. "Global Sourcing," CEPR Discussion Papers 4170, C.E.P.R. Discussion Papers.
  6. Grossman, Sanford J & Hart, Oliver, 1985. "The Cost and Benefits of Ownership: A Theory of Vertical and Lateral Integration," CEPR Discussion Papers 70, C.E.P.R. Discussion Papers.
  7. Corcos, G. & Irac, D. & Mion, G. & Verdier, T., 2012. "The determinants of intrafirm trade: Evidence from French firms," Working papers 362, Banque de France.
  8. repec:hrv:faseco:4784029 is not listed on IDEAS
  9. Baldwin, Richard & Venables, Anthony J, 2010. "Spiders and Snakes: Offshoring and Agglomeration in the Global Economy," CEPR Discussion Papers 8163, C.E.P.R. Discussion Papers.
  10. Costinot, Arnaud & Oldenski, Lindsay & Rauch, James, 2009. "Adaptation and the Boundary of Multinational Firms," CCES Discussion Paper Series 14, Center for Research on Contemporary Economic Systems, Graduate School of Economics, Hitotsubashi University.
  11. Pol Antràs & Davin Chor, 2012. "Organizing the Global Value Chain," NBER Working Papers 18163, National Bureau of Economic Research, Inc.
  12. Wilhelm Kohler & Marcel Smolka, 2009. "Global Sourcing Decisions and Firm Productivity: Evidence from Spain," CESifo Working Paper Series 2903, CESifo Group Munich.
  13. Tomiura, Eiichi, 2007. "Foreign outsourcing, exporting, and FDI: A productivity comparison at the firm level," Journal of International Economics, Elsevier, vol. 72(1), pages 113-127, May.
  14. Hart, Oliver D. & Moore, John, 1990. "Property Rights and the Nature of the Firm," Scholarly Articles 3448675, Harvard University Department of Economics.
  15. Van Biesebroeck, Johannes & Zhang, Lijun, 2011. "Global Sourcing of a Complex Good," CEPR Discussion Papers 8614, C.E.P.R. Discussion Papers.
  16. Corcos, Gregory & Irac, Delphine & Mion, Giordano & Verdier, Thierry, 2009. "The Determinants of Intra-Firm Trade," CEPR Discussion Papers 7530, C.E.P.R. Discussion Papers.
  17. Kohler, Wilhelm & Smolka, Marcel, 2014. "Global sourcing and firm selection," Economics Letters, Elsevier, vol. 124(3), pages 411-415.
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