NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Andrew Newman

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

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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 theoretically, and even less empirically, about the relationship between firm boundaries and the allocation of decision rights within firms. We develop a model in which firms choose which suppliers to integrate and whether to delegate decisions to integrated suppliers. We test the predictions of the model using a novel dataset that combines measures of vertical integration and delegation for a large set of firms from many countries and industries. In line with the model's predictions, we obtain three main results: (i) integration and delegation co-vary positively; (ii) producers are more likely to integrate suppliers in input sectors with greater productivity variation (as the option value of integration is greater); and (iii) producers are more likely to integrate supp...
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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