Asymmetric Spiders: Supplier Heterogeneity and the Organization of Firms

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.

[1]  Karl T. Ulrich,et al.  Beyond Make‐Buy: Internalization and Integration of Design and Production , 2005 .

[2]  Sergiu Hart,et al.  The Shapley value: The potential of the Shapley value , 1988 .

[3]  Oliver Falck,et al.  Why are Educated and Risk-Loving Persons More Mobile Across Regions? , 2012, SSRN Electronic Journal.

[4]  Tobias Wenzel,et al.  Price-Dependent Demand in Spatial Models , 2012 .

[5]  A. Barth,et al.  How large is the magnitude of fixed-mobile call substitution? Empirical evidence from 16 Europen countries , 2012 .

[6]  Irene Bertschek,et al.  More Bits – More Bucks? Measuring the Impact of Broadband Internet on Firm Performance , 2013 .

[7]  Tim Friehe,et al.  Status Concerns as a Motive for Crime? , 2013, SSRN Electronic Journal.

[8]  Fatima Lambarraa,et al.  On the Norms of Charitable Giving in Islam: A Field Experiment , 2012 .

[9]  Hans-Theo Normann,et al.  Effects of different cartel policies: evidence from the German power-cable industry , 2014 .

[10]  Miguel A. Fonseca,et al.  Explicit vs. Tacit Collusion – The Impact of Communication in Oligopoly Experiments , 2012 .

[11]  Annika Herr,et al.  The Welfare Impact of Parallel Imports: A Structural Approach Applied to the German Market for Oral Anti-Diabetics , 2014 .

[12]  T. Verdier,et al.  The determinants of intrafirm trade: evidence from French firms , 2013 .

[13]  Lars Bengtsson,et al.  Low-Cost versus Innovation: Contrasting Outsourcing and Integration Strategies in Manufacturing , 2009 .

[14]  Tomaso Duso,et al.  An Empirical Assessment of the 2004 EU Merger Policy Reform , 2013 .

[15]  Paolo Buccirossi,et al.  They Played the Merger Game: A Retrospective Analysis in the UK Videogames Market , 2013 .

[16]  N. Jentzsch,et al.  Targeted pricing and customer data sharing among rivals , 2013 .

[17]  Christian Kellner,et al.  The Effect of Ambiguity Aversion on Reward Scheme Choice , 2014 .

[18]  A. Venables,et al.  Spiders and Snakes: Offshoring and Agglomeration in the Global Economy , 2010 .

[19]  Georg Clemens,et al.  Do leniency policies facilitate collusion? Experimental evidence , 2015 .

[20]  Dragan Jovanovic,et al.  Passive partial ownership, sneaky takeovers, and merger control , 2014 .

[21]  Dragan Jovanovic,et al.  An equilibrium analysis of efficiency gains from mergers , 2012 .

[22]  M. Smolka,et al.  Global Sourcing of Heterogeneous Firms: Theory and Evidence , 2015, SSRN Electronic Journal.

[23]  Christian Wey,et al.  Multi-union bargaining: Tariff plurality and tariff competition , 2014 .

[24]  Hanna Hottenrott,et al.  Quantity or quality? Knowledge alliances and their effects on patenting , 2015 .

[25]  Tomaso Duso,et al.  Ex Post Merger Evaluation in the U.K. Retail Market for Books , 2016 .

[26]  Georg Clemens,et al.  Rebels without a clue? Experimental evidence on partial cartels , 2013 .

[27]  Torben Stühmeier,et al.  Roaming and investments in the mobile internet market , 2012 .

[28]  Dragan Jovanovic,et al.  Mergers, managerial incentives, and efficiencies , 2013 .

[29]  Dennis Rickert,et al.  Inter-Format Competition Among Retailers - The Role of Private Label Products in Market Delineation. , 2013 .

[30]  Marc Bataille,et al.  Intermodal competition on some routes in transportation networks: The case of inter urban buses and railways , 2013 .

[31]  Tim Friehe,et al.  Optimal Damages Multipliers in Oligopolistic Markets , 2015 .

[32]  Daniel Coublucq,et al.  Demand Estimation with Selection Bias: A Dynamic Game Approach with an Application to the US Railroad Industry , 2013 .

[33]  Hans-Theo Normann,et al.  Excess Capacity and Pricing in Bertrand-Edgeworth Markets: Experimental Evidence , 2013 .

[34]  Geza Sapi,et al.  Consumer Flexibility, Data Quality and Targeted Pricing , 2013 .

[35]  Geza Sapi,et al.  Bargaining, vertical mergers and entry , 2012 .

[36]  Ronald Peeters,et al.  The Impact of Timing on Bidding Behavior in Procurement Auctions of Contracts with Private Costs , 2010 .

[37]  T. Kippenberger.  When is virtual virtuous , 1997 .

[38]  Dennis Rickert,et al.  Bargaining power in manufacturer-retailer relationships , 2013 .

[39]  Tobias Wenzel,et al.  Piracy in a two-sided software market ☆ , 2013 .

[40]  Johannes Van Biesebroeck,et al.  Global Sourcing of a Complex Good , 2011 .

[41]  Elhanan Helpman,et al.  Global Sourcing , 2003, Journal of Political Economy.

[42]  Irina Hasnas,et al.  Consumer flexibility, data quality and location choice , 2017 .

[43]  Hanna Hottenrott,et al.  Policy-Induced Environmental Technology and Inventive Efforts: Is There a Crowding Out? , 2013, Industry and Innovation.

[44]  Volker Benndorf,et al.  Competition in the Workplace: An Experimental Investigation , 2012 .

[45]  Wilhelm Kohler,et al.  Global sourcing and firm selection , 2014 .

[46]  Eiichi Tomiura.  Foreign outsourcing, exporting, and FDI: A productivity comparison at the firm level , 2007 .

[47]  Thomas D. Jeitschko.  NYSE Changing Hands: Antitrust and Attempted Acquisitions of an Erstwhile Monopoly , 2013 .

[48]  Henry Chesbrough,et al.  When is Virtual Virtuous? Organizing for Innovation , 1999 .

[49]  Thomas D. Jeitschko,et al.  Adverse Effects of Patent Pooling on Product Development and Commercialization , 2012 .

[50]  Ralf Dewenter,et al.  More Ads, More Revs? Is there a Media Bias in the Likelihood to be Reviewed? , 2012 .

[51]  Michael Berlemann,et al.  Which Factors Drive the Decision to Boycott and Opt Out of Research Rankings? A Note , 2012 .

[52]  Tim Friehe,et al.  Cheap Talk About the Detection Probability , 2012 .

[53]  Annika Herr,et al.  Pharmaceutical prices under regulation: Tiered co-payments and reference pricing in Germany , 2012 .

[54]  Wilhelm Kohler,et al.  Global Sourcing: Evidence from Spanish Firm-Level Data , 2012 .

[55]  Gordon J. Klein,et al.  How regulation affects network and service quality in related markets , 2012 .

[56]  Ralf Dewenter,et al.  Hospital Market Concentration and Discrimination of Patients , 2013 .

[57]  Dieter Bös,et al.  Property rights and the nature of the firm journal of political economy: Oliver Hart and John Moore, Journal of political economy (1990), no. 6, 1119-1158 , 1991 .

[58]  Christian Wey,et al.  How to counter union power? Equilibrium mergers in international oligopoly , 2016 .

[59]  Wolfgang Dauth,et al.  The Rise of the East and the Far East: German Labor Markets and Trade Integration , 2013, SSRN Electronic Journal.

[60]  Tobias Regner,et al.  Voluntary payments, privacy and social pressure on the Internet: A natural field experiment , 2012 .

[61]  Luca Lambertini,et al.  Open Innovation in a dynamic cournot duopoly , 2014 .

[62]  Dragan Jovanovic,et al.  Investment behavior in a constrained dictator game , 2012 .

[63]  Davin Chor,et al.  Organizing the Global Value Chain , 2012 .

[64]  Nicolette Lakemond,et al.  Coordinating Supplier Involvement in Product Development Projects: A Differentiated Coordination Typology , 2006 .

[65]  O. Hart,et al.  Property Rights and the Nature of the Firm , 1988, Journal of Political Economy.

[66]  Dragan Jovanovic,et al.  Competition in Germany's Minute Reserve Power Market: An Econometric Analysis , 2014 .

[67]  Tobias Wenzel,et al.  Independent Service Operators in ATM Markets , 2014 .

[68]  Justus Haucap,et al.  Google, Facebook, Amazon, eBay: Is the Internet driving competition or market monopolization? , 2014 .

[69]  Daron Acemoglu,et al.  Contracts and Technology Adoption , 2007 .

[70]  Sanford J. Grossman,et al.  The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration , 1986 .

[71]  Mehmet Karaçuka,et al.  Consumer choice and local network effects in mobile telecommunications in Turkey , 2013 .

[72]  Veit Böckers,et al.  The green game changer: An empirical assessment of the effects of wind and solar power on the merit order , 2013 .

[73]  Christian Wey,et al.  Input Price Discrimination (Bans), Entry and Welfare , 2013 .

[74]  Gerhard Riener,et al.  Heterogeneous treatment effects in groups , 2013 .

[75]  Tobias Wenzel,et al.  Consumer myopia, competition and the incentives to unshroud add-on information , 2014 .

[76]  Justus Haucap,et al.  What drives the relevance and reputation of economics journals? An update from a survey among economists , 2015, Scientometrics.

[77]  F. Toubal,et al.  Productivity, Relationship-Specific Inputs and the Sourcing Modes of Multinationals , 2011 .

[78]  Yi Lu,et al.  Bi-sourcing in the global economy ☆ , 2009 .

[79]  Ben Jones,et al.  Firms, Contracts, and Trade Structure The Harvard community has made this article openly available. Please share how this access benefits you. Your story matters , 2003 .

[80]  Jens Suedekum,et al.  Financial Liberalization and the Relationship-Specificity of Exports , 2014 .

[81]  Tobias Wenzel,et al.  Strategic obfuscation and consumer protection policy ∗ , 2013 .

[82]  Justus Haucap,et al.  Why are Economists so Different? Nature, Nurture and Gender Effects in a Simple Trust Game , 2014 .

[83]  Tobias Wenzel,et al.  Strategic obfuscation and consumer protection policy in financial markets: Theory and experimental evidence , 2012 .

[84]  Johannes van Biesebroeck,et al.  Interdependent product cycles for globally sourced intermediates , 2014 .

[85]  Hans-Theo Normann,et al.  Simultaneous and Sequential Contributions to Step-level Public Goods , 2015 .

[86]  Ralf Dewenter,et al.  Media Bias and Advertising: Evidence from a German Car Magazine , 2014 .

[87]  C. Manasakis,et al.  Downstream Mode of Competition with Upstream Market Power , 2014 .

[88]  T. Verdier,et al.  The Determinants of Intra-Firm Trade , 2008 .

[89]  Wilhelm Kohler,et al.  Global Sourcing Decisions and Firm Productivity: Evidence from Spain , 2009, SSRN Electronic Journal.

[90]  Ulrich Heimeshoff,et al.  Pull-forward effects in the German car scrappage scheme: A time series approach , 2012 .

[91]  Christian Schwarz,et al.  Global Sourcing of Complex Production Processes , 2011, SSRN Electronic Journal.

[92]  Tim Friehe,et al.  Private Protection Against Crime When Property Value is Private Information , 2012, SSRN Electronic Journal.

[93]  Hans-Theo Normann,et al.  Do short-term laboratory experiments provide valid descriptions of long-term economic interactions? A study of Cournot markets , 2013 .

[94]  Justus Haucap,et al.  The Effects of Gasoline Price Regulations: Experimental Evidence , 2013 .

[95]  Ralf Dewenter,et al.  Less pain at the pump? The effects of regulatory interventions in retail gasoline markets , 2017 .

[96]  Elhanan Helpman,et al.  Contractual Frictions and Global Sourcing , 2006 .

[97]  Hanna Hottenrott,et al.  Patents as quality signals? The implications for financing constraints on R&D , 2014, Economics of Innovation and New Technology.

[98]  Isabel Teichmann,et al.  The Strategic Use of Private Quality Standards in Food Supply Chains , 2011 .

[99]  James E. Rauch,et al.  Adaptation and the Boundary of Multinational Firms , 2009, The Review of Economics and Statistics.

[100]  LLOYD S. SHAPLEY.  The potential of the Shapley value , 2003 .

[101]  David E. Weinstein,et al.  Globalization and the Gains from Variety , 2004 .

[102]  Hans-Theo Normann,et al.  Simultaneous and Sequential Contributions to Step-Level Public Goods: One vs. Two Provision Levels , 2015 .

[103]  R. Stern.  Quantitative Analysis of Newly Evolving Patterns of International Trade:Fragmentation, Offshoring of Activities, and Vertical Intra-Industry Trade , 2012 .

[104]  Vanessa von Schlippenbach,et al.  One‐Stop Shopping as a Cause of Slotting Fees: A Rent‐Shifting Mechanism , 2013 .

[105]  Julia Graf,et al.  The effects of rebate contracts on the health care system , 2014, The European Journal of Health Economics.

[106]  Kristian Giesen,et al.  City Age and City Size , 2014 .

[107]  F. Baumann,et al.  Design standards and technology adoption: welfare effects of increasing environmental fines when the number of firms is endogenous , 2017 .

[108]  D. Teece,et al.  Organizing for innovation: When is virtual virtuous? , 2002 .

[109]  L. Shapley.  A Value for n-person Games , 1988 .

[110]  Christian Wey,et al.  The Effects of Remedies on Merger Activity in Oligopoly , 2012 .

[111]  Tim Friehe,et al.  Competitive Pressure and Corporate Crime , 2016 .

[112]  Wieland Müller,et al.  Output Commitment Through Product Bundling: Experimental Evidence , 2013 .