Causes of Subcontracting: Evidence from Panel Data on Construction Firms
Manuel González Díaz
Universidad de Oviedo - Facultad de Economicas
Pompeu Fabra University
Universitat Pompeu Fabra - Faculty of Economic and Business Sciences
Journal of Economic Behavior and Organization, Vol. 42, No. 2, Pp. 167-187, 2000
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.
Keywords: Intangible assets, monitoring costs, specificity, subcontracting, vertical integration, uncertainty
JEL Classification: L22, L14, L74
Date posted: October 12, 2000
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