NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Andrew Newman

Boston University
Department of Economics
270 Bay State Road
Boston, MA 02215

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliations: Boston University and CEPR

NBER Working Papers and Publications

May 2018Come Together: Firm Boundaries and Delegation
with Laura Alfaro, Nicholas Bloom, Paola Conconi, Harald Fadinger, Patrick Legros, Raffaella Sadun, John Van Reenen: w24603
Little is known about the relationship between firm boundaries and the allocation of decision rights within firms. We develop a model in which final good producers choose which suppliers to integrate and whether to delegate decisions to integrated suppliers, when they are ex-ante uncertain about their ability. In this setting, integration has an option value: ownership rights give producers authority to delegate or centralize production decisions, depending on the realized ability of suppliers. To assess the evidence, we construct measures of vertical integration and delegation for thousands of firms in many countries and industries. Consistent with the model, we find that (i) integration and delegation co-vary positively; (ii) firms delegate more decisions to integrated suppliers of more ...
June 2010Do Prices Determine Vertical Integration?
with Laura Alfaro, Paola Conconi, Harald Fadinger: w16118
What is the relationship between product prices and vertical integration? While the literature has focused on how integration affects prices, this paper provides evidence that prices can affect integration. Many theories in organizational economics and industrial organization posit that integration, while costly, increases productivity. It follows from firms' maximizing behavior that higher prices induce more integration. The reason is that at low prices, increases in revenue resulting from enhanced productivity are too small to justify the cost, whereas at high prices the revenue benefit exceeds the cost. Trade policy provides a source of exogenous price variation to assess the validity of this prediction: higher tariffs should lead to higher prices and therefore to more integration. We c...

Published: Laura Alfaro & Paola Conconi & Harald Fadinger & Andrew F. Newman, 2016. "Do Prices Determine Vertical Integration?," The Review of Economic Studies, vol 83(3), pages 855-888. citation courtesy of

 
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