Corporate Governance, Organization and the Firm

Corporate Governance, Organization and the Firm

Co-operation and Outsourcing in the Global Economy

New Perspectives on the Modern Corporation series

Edited by Mario Morroni

In recent years, applied studies have shown widespread, profound and increasing heterogeneity across firms in terms of their strategy, organization arrangement and performance. This book investigates the diversity of business firms, offering a picture of the different organizational settings they adopt in their endeavour to cope with increasing competitive pressure.

Chapter 8: The General Profile of the Outsourcing Firm: Evidence for a Local Production System of Emilia Romagna

Massimiliano Mazzanti, Sandro Montresor and Paolo Pini

Subjects: business and management, corporate governance, economics and finance, corporate governance, industrial organisation


8. The general profile of the outsourcing firm: evidence for a local production system of Emilia Romagna1 Massimiliano Mazzanti, Sandro Montresor and Paolo Pini 8.1 INTRODUCTION Empirical evidence shows that both the volume and the value of intermediate inputs and business production services contracted out by firms, that is, of outsourcing, have risen dramatically in the last two decades (Domberger 1998; Spencer 2005). The determinants and the implications of the ‘buyrather-than-make’ decision have thus become a core topic in industrial organization. In particular, the attention of standard approaches has focused on transaction costs (for example, Grossman and Helpman 2002), ownership allocation and efficient investments (for example, Grossman and Hart 1986), formal versus real authority (for example, Aghion and Tirole 1997) and, in general, on the resulting incentive conflicts (Foss 2000). Outsourcing has also attracted the attention of ‘non-standard’ approaches, which have focused on production, rather than transactions, by addressing the role of firms’ capabilities and competences (for example, Mahnke 2001). Along the same line, the contractual analysis of the vertical scope of the firm refers to ‘real time’ (for example, Langlois 1992; Argyres and Liebeskind 1999) by pointing to path-dependency and inertia (Cacciatori and Jacobides 2005). In spite of the inner differences of these two approaches, it has recently been argued that understanding vertical integration and disintegration could benefit from overcoming the ‘production-transaction dichotomy’ implied by their independent analyses (Langlois and Foss 1999; Montresor 2004). A combined research effort has thus been recommended from...

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