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Firm boundaries in Transition countries. The influence of technological and institutional links

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  • Maria Litvinova
  • Maria Luigia Segnana

Abstract

Using BEEPS cross-section data for one of the worldÕs largest developing economy, transition countries, this paper aims at identifying the impact of technology intensity and contracting institutions on firmsÕ organizational forms, in particular vertical integration. Using the theoretical predictions about organizational choices drawn from the incomplete contracting models, we test the impacts of technological and institutional determinants. The results show that technological and institutional forces are oppositely directed. The improvement of contracting institutions weakens the propensity for vertical integration while the influence of technological complexity tends to increase it. Moreover, technological intensive countries and industries show the prevalence of vertically integrated organizational modes, a result enhanced by poorly functioning contracting institutions. Different impacts are also found for European and Non European transition countries. When these results are examined in light of the increasing exposure to trade, they show that this has reinforced rather that weakened the historical tendency towards vertical integration.

Suggested Citation

  • Maria Litvinova & Maria Luigia Segnana, 2015. "Firm boundaries in Transition countries. The influence of technological and institutional links," DEM Working Papers 2015/05, Department of Economics and Management.
    • Handle: RePEc:trn:utwprg:2015/05
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    More about this item

    Keywords

    Integration; Transition Countries; Contracting Institutions; Technology; Trust;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • P52 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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