Vertical Integration and Distance to Frontier
| Title: | Vertical Integration and Distance to Frontier |
| Author: |
Zilibotti, Fabrizio; Acemoglu, Daron; Aghion, Philippe
Note: Order does not necessarily reflect citation order of authors. |
| Citation: | Acemoglu, Daron, Philippe Aghion, and Fabrizio Zilibotti. 2003. Vertical integration and distance to frontier. Journal of the European Economic Association 1, no. 2-3: 630-638. |
| Full Text & Related Files: |
aghion_verticalintegration.pdf (45.29Kb; PDF) 
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| Abstract: | We construct a model where the equilibrium organization of firms changes as an economy approaches the world technology frontier. In vertically integrated firms, owners (managers) have to spend time both on production and innovation activities, and this creates managerial overload, and discourages innovation. Outsourcing of some production activities mitigates the managerial overload, but creates a holdup problem, causing some of the rents of the owners to be dissipated to the supplier. Far from the technology frontier, imitation activities are more important, and vertical integration is preferred. Closer to the frontier, the value of innovation increases, encouraging outsourcing. |
| Published Version: | http://dx.doi.org/10.1162/154247603322391260 |
| Terms of Use: | This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA |
| Citable link to this page: | http://nrs.harvard.edu/urn-3:HUL.InstRepos:4481512 |
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