Business Commonality, Standardization and Product Cycles

The Journal of International Trade & Economic Development

28 Pages Posted: 28 Mar 2022

See all articles by Theofanis Tsoulouhas

Theofanis Tsoulouhas

University of California-Merced, School of Social Sciences, Humanities & Arts, The Ernest & Julio Gallo Management Program

Date Written: March 4, 2022

Abstract

By analyzing production with a continuum of tasks subject to common stochastic effects, the analysis shows that tension between business commonality and standardization is an important source of product cycles. The paper addresses the question of whether business commonality and standardization work in tandem or against each other in a general framework, when fragmentation of production is or is not possible due to contractual incompleteness or technology features. Unlike current literature, the analysis shows that a product cycle can be obtained even with complete contracts. This is so because retaining manufacturing within the firm enhances and exploits commonality in the early stages of production and, hence, reduces the moral hazard cost of providing incentives, which would be a hidden cost of outsourcing instead. Standardization later on can favor offshoring.

Keywords: Product cycle, globalization, offshoring, complete and incomplete contracts, tournaments.

JEL Classification: D21, D23, D81, D86, F16, F23, F66, J33, J41, L24, M52.

Suggested Citation

Tsoulouhas, Theofanis, Business Commonality, Standardization and Product Cycles (March 4, 2022). The Journal of International Trade & Economic Development, Available at SSRN: https://ssrn.com/abstract=4049312

Theofanis Tsoulouhas (Contact Author)

University of California-Merced, School of Social Sciences, Humanities & Arts, The Ernest & Julio Gallo Management Program ( email )

Merced, CA 95343
United States
209-228-4640 (Phone)

HOME PAGE: http://tsoulouhas.info

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
4
Abstract Views
26
PlumX Metrics