Economising, Strategising and the Vertical Boundaries of the Firm

Dermot Leahy, Catia Montagna

Research output: Working paperDiscussion paper

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Abstract

We bridge the organisational economics and industrial economics literatures on the vertical boundaries of the firm by contextualising the transaction cost approach to the make-or-buy decision within an oligopolistic market structure. Firms invest in the quality of the intermediate resulting in the endogenous determination of the price of the intermediate and marginal production cost of the final good. We highlight new strategic incentives to outsource/vertically integrate and show that firm asymmetries can emerge endogenously, with firms choosing different modes of operation, even when they are ex-ante identical. We apply our model to a number of different international trading setups.
Original languageEnglish
PublisherUniversity of Aberdeen Business School
Number of pages41
Publication statusPublished - Jul 2015

Publication series

NameDiscussion Paper in Economics
PublisherUniversity of Aberdeen
No.5
Volume15
ISSN (Electronic)0143-4543

Fingerprint

Boundaries of the firm
Cost of production
Industrial economics
Asymmetry
Make or buy decisions
Incentives
Market structure
Transaction costs
Organizational economics

Keywords

  • Oligopoly
  • Outsourcing
  • Vertical Integration
  • Trade Liberalisation

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

Cite this

Leahy, D., & Montagna, C. (2015). Economising, Strategising and the Vertical Boundaries of the Firm. (Discussion Paper in Economics; Vol. 15, No. 5). University of Aberdeen Business School.

Economising, Strategising and the Vertical Boundaries of the Firm. / Leahy, Dermot; Montagna, Catia.

University of Aberdeen Business School, 2015. (Discussion Paper in Economics; Vol. 15, No. 5).

Research output: Working paperDiscussion paper

Leahy, D & Montagna, C 2015 'Economising, Strategising and the Vertical Boundaries of the Firm' Discussion Paper in Economics, no. 5, vol. 15, University of Aberdeen Business School.
Leahy D, Montagna C. Economising, Strategising and the Vertical Boundaries of the Firm. University of Aberdeen Business School. 2015 Jul. (Discussion Paper in Economics; 5).
Leahy, Dermot ; Montagna, Catia. / Economising, Strategising and the Vertical Boundaries of the Firm. University of Aberdeen Business School, 2015. (Discussion Paper in Economics; 5).
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