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Firms' Boundaries and the Division of Labor: Empirical Strategies

Author

Listed:
  • Luis Garicano

    (University of Chicago GSB, CEPR,)

  • Thomas N. Hubbard

    (University of Chicago GSB, NBER,)

Abstract

A large theoretical literature focuses on the question: What determines firms' boundaries? Recently, Garicano and Santos and Holmstrom and Milgrom have proposed theories in which firms' boundaries reflect the division of labor across individuals. This paper discusses strategies for generating and testing empirical propositions from this emerging class of theories. We propose that variation in the returns to specialization is extremely useful to test and quantify the effect of the division of labor on firms' boundaries. We discuss the use of two shifters to the returns to specialization, and relate how we exploit one of these, market size, in preliminary work on the determinants of law firms' boundaries in the United States. (JEL: L14, L22, L24, L84) Copyright (c) 2003 The European Economic Association.

Suggested Citation

  • Luis Garicano & Thomas N. Hubbard, 2003. "Firms' Boundaries and the Division of Labor: Empirical Strategies," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 495-502, 04/05.
    • Handle: RePEc:tpr:jeurec:v:1:y:2003:i:2-3:p:495-502
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    Citations

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    Cited by:

    1. Tsuchiya, Ryuichiro & 土屋, 隆一郎, 2006. "The Effect of Prior Employer Firm Size on Entrepreneurs' Skills," Discussion Papers 2006-16, Graduate School of Economics, Hitotsubashi University.
    2. Olivier Sautel, 2007. "L'évolution de la théorie des contrats incomplets face à la dé-intégration verticale," Revue d'économie industrielle, De Boeck Université, vol. 0(1), pages 5-5.
    3. Bar-Isaac, Heski, 2009. "Breadth, depth, and competition," Economics Letters, Elsevier, vol. 103(2), pages 110-112, May.
    4. Luis Garicano & Thomas N. Hubbard, 2003. "Specialization, Firms, and Markets: The Division of Labor Within and Between Law Firms," NBER Working Papers 9719, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • L84 - Industrial Organization - - Industry Studies: Services - - - Personal, Professional, and Business Services

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