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Vertical Integration and Distance to Frontier

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Author Info
Daron Acemoglu
Philippe Aghion
Fabrizio Zilibotti

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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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9191.

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Date of creation: Sep 2002
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Handle: RePEc:nbr:nberwo:9191

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Find related papers by JEL classification:
L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Acemoglu, Daron & Zilibotti, Fabrizio, 1999. " Information Accumulation in Development," Journal of Economic Growth, Springer, vol. 4(1), pages 5-38, March. [Downloadable!] (restricted)
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  2. Aghion, Philippe & Tirole, Jean, 1994. "Formal and Real Authority in Organizations," IDEI Working Papers 37, Institut d'Économie Industrielle (IDEI), Toulouse.
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  3. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August. [Downloadable!] (restricted)
    Other versions:
  4. Martimort, David & Verdier, Thierry, 2001. "Monopolies Life Cycle, Bureaucratization, and Schumpeterian Growth," CEPR Discussion Papers 2700, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Acemoglu, Daron & Aghion, Philippe & Zilibotti, Fabrizio, 2002. "Distance to Frontier, Selection, and Economic Growth," CEPR Discussion Papers 3467, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  6. Gene M. Grossman & Elhanan Helpman, 2002. "Integration Versus Outsourcing In Industry Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 85-120, February. [Downloadable!] (restricted)
  7. Francois, P. & Roberts, J., 2001. "Contracting productivity growth," Discussion Paper 35, Tilburg University, Center for Economic Research. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Eiichi Tomiura, 2004. "Foreign outsourcing and firm-level characteristics: evidence from Japanese manufacturers," Hi-Stat Discussion Paper Series d04-64, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  2. Yuriy Gorodnichenko & Jan Svejnar & Katherine Terrell, 2007. "When Does FDI Have Positive Spillovers? Evidence from 17 Emerging Market Economies," IZA Discussion Papers 3079, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  3. Irena Grosfeld, 2006. "Ownership concentration and firm performance: Evidence from an emerging market," PSE Working Papers 2006-18, PSE (Ecole normale supérieure). [Downloadable!]
  4. Yasuyuki Todo & Satoshi Shimizutani, 2005. "Overseas R&D Activities by Multinational Enterprises: Evidence from Japanese Firm-Level Data," Hi-Stat Discussion Paper Series d05-91, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  5. Liza Jabbour & Maria Pluvia Zuniga, . "Drivers of the Offshore Outsourcing of R&D: Empirical Evidence from French Manufacturers," Discussion Papers 09/04, University of Nottingham, GEP. [Downloadable!]
  6. Henrekson, Magnus, 2002. "Entrepreneurship: A Weak Link in the Welfare State," Working Paper Series in Economics and Finance 518, Stockholm School of Economics, revised 04 Mar 2005. [Downloadable!]
    Other versions:
  7. Alex Coad, 2008. "Distance to Frontier and Appropriate Business Strategy," LEM Papers Series 2008/13, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy. [Downloadable!]
    Other versions:
  8. Irena Grosfeld, 2006. "Ownership concentration & firm performance: Evidence from an emerging market," William Davidson Institute Working Papers Series wp834, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  9. Aiginger, K, 2004. "The Bumpy Road of Convergence: the Catching Up Experience in Portugal, Spain and Greece," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 22, pages 1-22, Diciembre. [Downloadable!] (restricted)
  10. Stryszowski, Piotr, 2006. "Intellectual property rights, globalization and growth," Discussion Paper 76, Tilburg University, Center for Economic Research. [Downloadable!]
  11. Enrico Perotti & Paolo Volpin, 2004. "Lobbying on Entry," Tinbergen Institute Discussion Papers 04-088/2, Tinbergen Institute. [Downloadable!]
    Other versions:
  12. Martimort, David & Verdier, Thierry, 2002. "From Inside the Firm to the Growth Process," IDEI Working Papers 147, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
    Other versions:
  13. repec:bep:glecon:6:2007:4:4 is not listed on IDEAS
  14. Grace Li Ann Yong & Kong Weng Ho, 2006. "Innovation, Imitation and Entrepreneurship," Economic Growth centre Working Paper Series 0607, Nanyang Technolgical University, School of Humanities and Social Sciences, Economic Growth centre. [Downloadable!]
    Other versions:
  15. Paul Beaudry & Patrick Francois, 2005. "Managerial Skill Acquisition and the Theory of Economic Development," NBER Working Papers 11451, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  16. Arvind Virmani, 2005. "Policy regimes, growth and poverty in India : Lessons of government failure and entrepreneurial success," Indian Council for Research on International Economic Relations, New Delhi Working Papers 170, Indian Council for Research on International Economic Relations, New Delhi, India. [Downloadable!]
  17. Tehmina S. Khan, 2006. "Productivity Growth, Technological Convergence, R&D, Trade, and Labor Markets: Evidence from the French Manufacturing Sector," IMF Working Papers 06/230, International Monetary Fund. [Downloadable!]
  18. Francois, P. & Lloyd-Ellis, H., 2003. "Co-movement, capital and contracts: 'normal' cycles through creative destruction," Discussion Paper 62, Tilburg University, Center for Economic Research. [Downloadable!]
  19. Shingo Ishiguro, 2007. "Organizational Dynamics," Discussion Papers in Economics and Business 07-14, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP). [Downloadable!]
  20. Daron Acemoglu & Philippe Aghion & Rachel Griffith & Fabrizio Zilibotti, 2004. "Vertical integration and technology: theory and evidence," IFS Working Papers W04/34, Institute for Fiscal Studies. [Downloadable!]
    Other versions:
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