We study the optimal organizational structure of a firm in a sequential supply chain when investments are relationship specific and contracts are incomplete. The market structure for the final product is monopolistic competition. Production follows a preordered sequence and exhibits high complementarity between stages. There are three types of actors: upstream suppliers, downstream suppliers and final-good producers (firms). In designing their organizational structure, firms in each stage choose not only the ownership structure, i.e., vertical integration versus outsourcing, but also the input-procurement strategy, i.e., delegation versus control. The separation of asset ownership and input-procurement rights leads to a novel organizational mode, which we call ‘outsourcing with delegation.’ We determine the implications of this new organizational mode in firms’ global sourcing decisions. © 2022 Elsevier B.V. All rights reserved.
A new dimension in global value chains: Control vs. delegation in input procurement / Karabay, Bilgehan. - In: JOURNAL OF INTERNATIONAL ECONOMICS. - ISSN 0022-1996. - ELETTRONICO. - 137:(2022), p. 103584. [10.1016/j.jinteco.2022.103584]
A new dimension in global value chains: Control vs. delegation in input procurement
Karabay, Bilgehan
2022-01-01
Abstract
We study the optimal organizational structure of a firm in a sequential supply chain when investments are relationship specific and contracts are incomplete. The market structure for the final product is monopolistic competition. Production follows a preordered sequence and exhibits high complementarity between stages. There are three types of actors: upstream suppliers, downstream suppliers and final-good producers (firms). In designing their organizational structure, firms in each stage choose not only the ownership structure, i.e., vertical integration versus outsourcing, but also the input-procurement strategy, i.e., delegation versus control. The separation of asset ownership and input-procurement rights leads to a novel organizational mode, which we call ‘outsourcing with delegation.’ We determine the implications of this new organizational mode in firms’ global sourcing decisions. © 2022 Elsevier B.V. All rights reserved.File | Dimensione | Formato | |
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