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Contract Incompleteness and the Boundaries of the Firm in Times of COVID-19

Author

Listed:
  • Marta Bernasconi

    (Università degli Studi di Milano-Bicocca)

  • Sara Galetti

    (Università degli Studi di Milano-Bicocca)

  • Valeria Gattai

    (Università degli Studi di Milano-Bicocca
    Università degli Studi di Milano-Bicocca)

  • Piergiovanna Natale

    (Università degli Studi di Milano-Bicocca
    Università degli Studi di Milano-Bicocca)

Abstract

In this paper, we study the firm’s boundaries in times of COVID-19. Ownership and location decisions govern sourcing and shape firms’ boundaries. Adopting incomplete contracts theory/international economics perspective, we investigate the determinants of ownership and location decisions and explore COVID-19–induced changes in firms’ boundaries. Drawing on survey data from a sample of Italian firms, our estimates suggest that input specificity drives the ownership decision, whereas the location decision depends on productivity. Few firms re-consider sourcing because of the pandemic, suggesting a great deal of inertia in firm’s boundaries.

Suggested Citation

  • Marta Bernasconi & Sara Galetti & Valeria Gattai & Piergiovanna Natale, 2022. "Contract Incompleteness and the Boundaries of the Firm in Times of COVID-19," Journal of Industry, Competition and Trade, Springer, vol. 22(3), pages 371-409, December.
    • Handle: RePEc:kap:jincot:v:22:y:2022:i:3:d:10.1007_s10842-022-00387-7
    DOI: 10.1007/s10842-022-00387-7
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