Decentralization and Contracting Out: A New Pattern for Internal and External Boundaries of the Firm

34 Pages Posted: 17 Jul 2013

See all articles by Guillaume Chanson

Guillaume Chanson

Université Paris I Panthéon-Sorbonne - Laboratoire PRISM

Bertrand V. Quelin

HEC Paris - Strategy & Business Policy

Date Written: February 1, 2013

Abstract

This paper is devoted to the pattern of activity within large companies, through the two criteria of decentralization and contracting out. Our goal is to understand whether the determinants are identical for both internal and external boundaries of the firm. One literature stream contributes to the analysis of the internal structure and organization of divisional companies, studying the functions assigned to headquarters or divisions. Another part of the literature has focused on the boundaries of the firm issues and the firm's core activities. Few works are at the junction of these two traditions. This study builds on an empirical study dedicated to the book publishing industry. Our analysis leads to discuss determinants of internal and external borders. We show that functions or activities with high potential of economies of scale are mainly centralized and internalized. On reverse, those related to core business and non-programmable functions are mostly at divisional level and contracted out.

Keywords: boundaries of the firm, centralization, contracting out, central services

Suggested Citation

Chanson, Guillaume and Quélin, Bertrand V., Decentralization and Contracting Out: A New Pattern for Internal and External Boundaries of the Firm (February 1, 2013). HEC Paris Research Paper No. SPE-2013-990. Available at SSRN: https://ssrn.com/abstract=2294841

Guillaume Chanson (Contact Author)

Université Paris I Panthéon-Sorbonne - Laboratoire PRISM ( email )

17 rue de la Sorbonne
Paris, 75005
France

Bertrand V. Quélin

HEC Paris - Strategy & Business Policy ( email )

Jouy-en-Josas Cedex, 78351
France

HOME PAGE: http://www.hec.fr/quelin

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