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Causes of subcontracting: Evidence from panel data on construction firms

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This paper examines factors explaining subcontracting decisions in the construction industry. Rather than the more common cross-sectional analyses, we use panel data to evaluate the influence of all relevant variables. We design and use a new index of the closeness to small numbers situations to estimate the extent of hold-up problems. Results show that as specificity grows, firms tend to subcontract less. The opposite happens when output heterogeneity and the use of intangible assets and capabilities increase. Neither temporary shortage of capacity nor geographical dispersion of activities seem to affect the extent of subcontracting. Finally, proxies for uncertainty do not show any clear effect.

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  • Manuel González & Benito Arruñada & Alberto Fernández, 1999. "Causes of subcontracting: Evidence from panel data on construction firms," Economics Working Papers 428, Department of Economics and Business, Universitat Pompeu Fabra.
    • Handle: RePEc:upf:upfgen:428
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    Cited by:

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    2. Arrighetti, Alessandro & Landini, Fabio & Lasagni, Andrea, 2014. "Intangible assets and firm heterogeneity: Evidence from Italy," Research Policy, Elsevier, vol. 43(1), pages 202-213.
    3. Ivan Dufeu, 2008. "Déterminants du choix d’intégration et de désintégration verticale des entreprises," Post-Print hal-02815119, HAL.
    4. Álvaro Romero-Barriuso & Blasa MaríaVillena-Escribano & María de las Nieves González-García & María Segarra-Cañamares & Ángel Rodríguez-Sáiz, 2019. "The Registry of Accredited Companies in the Construction Sector in Spain: An Administrative Instrument for Risk-Prevention Control," IJERPH, MDPI, vol. 16(17), pages 1-14, August.
    5. Francine Lafontaine & Margaret Slade, 2007. "Vertical Integration and Firm Boundaries: The Evidence," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 629-685, September.
    6. Luigi Pascali, 2009. "Contract Incompleteness, Globalization and Vertical Structure: an Empirical Analysis," Boston College Working Papers in Economics 727, Boston College Department of Economics.
    7. Yvan Dufeu, 2008. "Déterminants du choix d’intégration et de désintégration verticale des entreprises," Revue Finance Contrôle Stratégie, revues.org, vol. 11(1), pages 131-154, March.
    8. Alger Ingela & Ma Ching-to Albert & Renault Regis, 2012. "Experience Benefits and Firm Organization," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-35, September.
    9. Brahm, Francisco & Tarziján, Jorge, 2012. "The impact of complexity and managerial diseconomies on hierarchical governance," Journal of Economic Behavior & Organization, Elsevier, vol. 84(2), pages 586-599.
    10. Roberto Antonietti & Maria Rosaria Ferrante & Riccardo Leoncini, 2009. "Local spillovers, production technology and the choice to make and/or buy. Empirical evidence from Emilia Romagna," Openloc Working Papers 0902, Public policies and local development.
    11. Leoncini, Riccardo & Montresor, Sandro & Rentocchini, Francesco, 2016. "CO2-reducing innovations and outsourcing: Evidence from photovoltaics and green construction in North-East Italy," Research Policy, Elsevier, vol. 45(8), pages 1649-1659.
    12. Roberto Antonietti & Maria Rosaria Ferrante & Riccardo Leoncini, 2016. "Local market size, social capital and outsourcing: evidence from Emilia Romagna," Small Business Economics, Springer, vol. 47(1), pages 243-260, June.
    13. Joan Ramon Rosés, 2005. "Subcontracting and vertical integration in the Spanish cotton industry," Economics Working Papers 816, Department of Economics and Business, Universitat Pompeu Fabra.
    14. Felippe Cauê Serigati & Paulo Furquim De Azevedo, 2016. "How To Indirectly Measure Market Transaction Costs," Anais do XLII Encontro Nacional de Economia [Proceedings of the 42nd Brazilian Economics Meeting] 192, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    15. Álvaro Romero & María de las Nieves González & María Segarra & Blasa María Villena & Ángel Rodríguez, 2019. "Mind the Gap: Professionalization is the Key to Strengthening Safety and Leadership in the Construction Sector," IJERPH, MDPI, vol. 16(11), pages 1-16, June.
    16. Chiara Franco & Francesco Rentocchini & Giuseppe Vittucci Marzetti, 2008. "Why do firms invest abroad? An analysis of the motives underlying Foreign Direct Investments," Department of Economics Working Papers 0817, Department of Economics, University of Trento, Italia.
    17. H. Møllgaard & Jochen Lorentzen, 2004. "Exclusive Safeguards and Technology Transfer: Subcontracting Agreements in Eastern Europe's Car Component Industry," European Journal of Law and Economics, Springer, vol. 17(1), pages 41-71, January.
    18. Erol Taymaz & Yilmaz Kilicaslan, 2005. "Determinants of subcontracting and regional development: An empirical study on Turkish textile and engineering industries," Regional Studies, Taylor & Francis Journals, vol. 39(5), pages 633-645.
    19. Ivona Ivić & Anita Cerić, 2024. "Mitigation Measures for Information Asymmetry between Participants in Construction Projects: The Impact of Trust," Sustainability, MDPI, vol. 16(16), pages 1-27, August.
    20. Andrabi, Tahir & Ghatak, Maitreesh & Khwaja, Asim Ijaz, 2006. "Subcontractors for tractors: Theory and evidence on flexible specialization, supplier selection, and contracting," Journal of Development Economics, Elsevier, vol. 79(2), pages 273-302, April.
    21. Ulrike Muehlberger, 2005. "Hierarchies, relational contracts and new forms of outsourcing," ICER Working Papers 22-2005, ICER - International Centre for Economic Research.
    22. Songhee Kang & Jörn Altmann & Gangmin Park, 2024. "Empirical Analysis of the Effect of an Evidence-Based Policy for a Wicked Problem—Lessons Learned from the South Korean Industry Policy History for the Structural Reform of Subcontracting Practice in ," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 12809-12829, September.
    23. Erol Taymaz & Yilmaz Kilicaslan, 2001. "Subcontracting dynamics and economic development: A study on textile and engineering industries," ERC Working Papers 0108, ERC - Economic Research Center, Middle East Technical University, revised Aug 2001.
    24. Benito Arruñada, 2000. "The role of institutions in the contractual process," Economics Working Papers 521, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 2003.
    25. Ivona Ivić & Anita Cerić, 2023. "Risks Caused by Information Asymmetry in Construction Projects: A Systematic Literature Review," Sustainability, MDPI, vol. 15(13), pages 1-25, June.

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    More about this item

    Keywords

    Intangible assets; monitoring costs; specificity; subcontracting; vertical integration; uncertainty;
    All these keywords.

    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L74 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Construction

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