Abstract

http://ssrn.com/abstract=346642
 
 

References (10)



 
 

Citations (43)



 


 



Vertical Integration and Distance to Frontier


Daron Acemoglu


Massachusetts Institute of Technology (MIT) - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Philippe Aghion


Harvard University - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Fabrizio Zilibotti


University of Zurich; Centre for Economic Policy Research (CEPR)

October 2002

CEPR Discussion Paper No. 3565

Abstract:     
We construct a model where the equilibrium organization of firms changes as an economy approaches the world technology frontier. In vertically integrated firms, owners (managers) have to spend time both on production and innovation activities, and this creates managerial overload, and discourages innovation. Outsourcing of some production activities mitigates the managerial overload, but creates a holdup problem, causing some of the rents of the owners to be dissipated to the supplier. Far from the technology frontier, imitation activities are more important, and vertical integration is preferred. Closer to the frontier, the value of innovation increases, encouraging outsourcing.

Number of Pages in PDF File: 16

Keywords: Economic growth, contracts, internal organization of the firm, vertical integration

JEL Classification: L16, L22, O31, O33, O38, O40

working papers series


Date posted: November 1, 2002  

Suggested Citation

Acemoglu, Daron and Aghion, Philippe and Zilibotti, Fabrizio, Vertical Integration and Distance to Frontier (October 2002). CEPR Discussion Paper No. 3565. Available at SSRN: http://ssrn.com/abstract=346642

Contact Information

Daron Acemoglu (Contact Author)
Massachusetts Institute of Technology (MIT) - Department of Economics ( email )
50 Memorial Drive
Room E52-380b
Cambridge, MA 02142
United States
617-253-1927 (Phone)
617-253-1330 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Philippe Aghion
Harvard University - Department of Economics ( email )
Littauer Center
Cambridge, MA 02138
United States
617-495-6675 (Phone)
617-495-7730 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Fabrizio Zilibotti
University of Zurich ( email )
Rämistrasse 71
Zürich, CH-8006
Switzerland
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
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