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The network contract

Author

Listed:
  • Chiara Bentivogli

    (Banca d'Italia)

  • Fabio Quintiliani

    (Banca d'Italia)

  • Daniele Sabbatini

    (Banca d'Italia)

Abstract

This paper studies costs and benefits of firm networks, and related industrial policies, with a focus on the �network contract� recently introduced in the Italian legislation. Incentives to networks creation could be useful to foster future mergers, but may prove ineffective as a substitute for firms� growth. The network contract is a comparatively more flexible instrument, but its potential is hindered by the indeterminacy of its contents: some standardization would be beneficial. The contract adds to a plethora of incentives that distort firms� choices. Members of a network contract have often a pre-established relationship, and are located in classical marshallian industrial districts. One novel aspect is that sometimes partner firms are located in faraway regions. Probit regressions show: i) the probability of entering a network contract increases with firm�s size and growth; this shows that the network does not seem to be the solution to small size problems; ii) the degree of leverage does not discriminate between firms in networks and the others.

Suggested Citation

  • Chiara Bentivogli & Fabio Quintiliani & Daniele Sabbatini, 2013. "The network contract," Questioni di Economia e Finanza (Occasional Papers) 152, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_152_13
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    File URL: https://www.bancaditalia.it/pubblicazioni/qef/2013-0152/QEF_152.pdf
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    Cited by:

    1. Chiara Burlina, 2017. "Local Externalities and Firm Internationalisation," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 108(5), pages 592-604, October.

    More about this item

    Keywords

    firms� networks; firm size;

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • K00 - Law and Economics - - General - - - General (including Data Sources and Description)

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