2020
DOI: 10.1111/jpet.12440
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Make and buy in a polluting industry

Abstract: The literature paid significant attention to analyze the rationale for the make-or-buy strategy of firms. However, a related empirically relevant strategy of make and buy did not get much attention. We show that the presence of tax/subsidy policies, which are particularly important in the presence of environmental pollution, may create a rationale for the make-and-buy strategy of firms. Thus, we provide a new rationale for the make-and-buy strategy of firms which is different from the existing reasons, such as… Show more

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Cited by 14 publications
(5 citation statements)
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References 51 publications
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“…They show that if information can be provided at a low marginal cost and if most consumers are initially uninformed, then information provides greater welfare than taxation because the tax is not a fully efficient policy instrument in this setting. Iida and Mukherjee (2020) demonstrate that under imperfect competition, environmental taxation can create a rationale for bisourcing, which occurs when firms produce certain inputs in‐house and also purchase them from outside suppliers. Another article related to this paper is by Garrido, Espinola‐Arredondo, and Munoz‐Garcia (2020), who utilize a signaling approach to study how asymmetric information promotes firms' greenwashing behavior and whether mandatory certification can ameliorate it.…”
Section: Introductionmentioning
confidence: 99%
“…They show that if information can be provided at a low marginal cost and if most consumers are initially uninformed, then information provides greater welfare than taxation because the tax is not a fully efficient policy instrument in this setting. Iida and Mukherjee (2020) demonstrate that under imperfect competition, environmental taxation can create a rationale for bisourcing, which occurs when firms produce certain inputs in‐house and also purchase them from outside suppliers. Another article related to this paper is by Garrido, Espinola‐Arredondo, and Munoz‐Garcia (2020), who utilize a signaling approach to study how asymmetric information promotes firms' greenwashing behavior and whether mandatory certification can ameliorate it.…”
Section: Introductionmentioning
confidence: 99%
“… There is another set of papers showing the effects of environmental regulation on outsourcing (see, e.g. Antonietti et al, 2017; Cole et al, 2014; Iida & Mukherjee, 2020; Lyu, 2016; Michel, 2013). …”
mentioning
confidence: 99%
“…The next three papers, by Podhorsky (2020), Garrido et al (2020) and Iida and Mukherjee (2020), are concerned with various aspects of regulation in environmental economics. This field, in its multiple aspects has been an important area for JPET; see, for example, the recent contributions by Bosi et al (2019), Constantatos et al (2020), Ouattara et al (2019), and Tsakiris et al (2019) on various aspects of environmental economics.…”
mentioning
confidence: 99%
“…The paper by Iida and Mukherjee (2020) propose a novel justification for the widely debated make‐and‐buy strategy of firms by showing that the presence of tax/subsidy policies, which are particularly important in the presence of environmental pollution, may create a rationale for this strategy. The authors consider a model where a firm can produce a final good and the critical polluting input required to produce the final good.…”
mentioning
confidence: 99%