Agglomeration, opportunism, and the organization of production

Helsley, Robert W.; Strange, William C.

doi:10.1016/j.jue.2006.05.006

Cited by 53 publications

(34 citation statements)

References 36 publications

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“…Marshall (1920) points out that geographic concentration facilitates input sharing among firms, 1 and Stigler (1951) argues that input sharing can make firms more vertically disintegrated. Recent work further explores the mechanisms through which geographic concentration promotes vertical disintegration, such as lowering cost (Goldstein and Gronberg, 1984) and reducing opportunism (Helsley and Strange, 2007).…”

Section: Introductionmentioning

confidence: 99%

Geographic concentration and vertical disintegration: Evidence from China

2009

Journal of Urban Economics

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Existing theoretical literature predicts that geographic concentration encourages vertical disintegration of firms. Nevertheless, empirical evidence of this prediction is limited, especially in developing countries. Using data on manufacturing firms from China, this paper documents a positive correlation between geographic concentration and vertical disintegration. Additionally, this paper uses the instrumental variable approach to address the issue of endogeneity and finds that geographic concentration has a positive causal effect on vertical disintegration.

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Section: Introductionmentioning

confidence: 99%

Geographic concentration and vertical disintegration: Evidence from China

2009

Journal of Urban Economics

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“…Yet in contrast to their approach, we use a partial equilibrium setting of two economies, which differ only in size but not in other economic fundamentals. 4 This relates our paper to a recent contribution by Helsley and Strange [9] who study the choice between integrated production and outsourcing as well as the locational decision of input producers in a uniform framework. In contrast to our study, however, they do not provide insights into the role of national transport costs for international outsourcing in a two-country setting.…”

Section: Introductionmentioning

confidence: 82%

“…9 This indicates a well-known trade-off in the price-setting process. A higher price raises profits for a given level of output but, at the same time, reduces the volume of sales with adverse effects on profits.…”

Section: Stage (V) -Consumptionmentioning

confidence: 96%

Outsourcing and Trade in a Spatial World

Egger

2005

SSRN Journal

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This paper provides an analysis of outsourcing and trade in a spatial model à la Hotelling. In this setting, we discuss the trade-off between transport-cost-related disadvantages and outsourcing-related production cost advantages of a large economy and we investigate how the existence of national transport costs influences both the structure of industrial production and the pattern of final goods trade. In addition, the model gives a rich picture of the possible welfare effects of trade liberalization. In particular, we show that a final goods exporting country definitely gains from economic integration, while a final goods importing country may lose. Finally, when lowering domestic outsourcing activities, trade liberalization may reduce world welfare, even if pro-competitive effects lead to a decline in consumer prices.Outsourcing and Trade in a Spatial World * Hartmut Egger† and Peter Egger ‡ December 10, 2006Abstract This paper provides an analysis of outsourcing and trade in a spatial modelà la Hotelling. In this setting, we discuss the trade-off between transport-cost-related disadvantages and outsourcing-related production cost advantages of a large economy and we investigate how the existence of national transport costs influences both the structure of industrial production and the pattern of final goods trade. In addition, the model gives a rich picture of the possible welfare effects of trade liberalization. In particular, we show that a final goods exporting country definitely gains from economic integration, while a final goods importing country may lose. Finally, when lowering domestic outsourcing activities, trade liberalization may reduce world welfare, even if pro-competitive effects lead to a decline in consumer prices.

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“…Another theoretical paper in this vein is Helsley and Strange (2007). They analyze a linear space where buyers are equally spaced.…”

Section: Relation With Previous Literaturementioning

confidence: 99%

Supplier-Buyer Proximity and Production to Order Choice

Casaburi

Minerva

2008

SSRN Journal

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We study the determinants of the firm-level choice to produce following an order placed by a downstream firm (production to order) or to produce in advance. We rationalize this choice through a simple theoretical model and apply it to a firm-level empirical analysis. Relying on a large panel of Italian manufacturing firms, we show that two main variables affect this choice: the distance between the supplier and the buyer and the degree of product differentiation in downstream industries where products are sold. The impact of proximity on the choice of producing to order crucially depends on the degree of product differentiation in downstream markets. We find that, in industries where average product differentiation is high, production to order prevails if the supplier is located close to the buyer. On the contrary, proximity is associated to production in advance in homogeneous sectors. We also find that, if suppliers are located in a different country from that of the buyers, they will tend to produce to order if product differentiation in downstream industries is low, and produce in advance if product differentiation is high. We also narrow the scope of our analysis to analyze the determinants of production to order originating from the same province where the supplier is located.

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Agglomeration, opportunism, and the organization of production

Cited by 53 publications

References 36 publications

Geographic concentration and vertical disintegration: Evidence from China

Geographic concentration and vertical disintegration: Evidence from China

Outsourcing and Trade in a Spatial World

Supplier-Buyer Proximity and Production to Order Choice

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