Dokument: Essays on the Organization of Multinational Firms

Titel:	Essays on the Organization of Multinational Firms
URL für Lesezeichen:	https://docserv.uni-duesseldorf.de/servlets/DocumentServlet?id=40116
URN (NBN):	urn:nbn:de:hbz:061-20161116-105655-7
Kollektion:	Dissertationen
Sprache:	Englisch
Dokumententyp:	Wissenschaftliche Abschlussarbeiten » Dissertation
Medientyp:	Text
Autor:	Nowak, Verena Nina [Autor]
Dateien:	[Dateien anzeigen] Adobe PDF [Details] 9,32 MB in einer Datei [ZIP-Datei erzeugen] Dateien vom 16.11.2016 / geändert 16.11.2016
Beitragende:	Prof. Dr. Südekum, Jens [Betreuer/Doktorvater] Prof. Dr. Normann, Hans-Theo [Gutachter]
Stichwörter:	firm organization, multinational firms, intra-firm trade, outsourcing, property rights, knowledge protection
Dewey Dezimal-Klassifikation:	300 Sozialwissenschaften, Soziologie » 330 Wirtschaft
Beschreibung:	Firms often use intermediate inputs in the production of their final goods. For each of these inputs, the firm decides from which type of supplier to source it. More precisely, in this “make or buy”-decision, the firm chooses whether to source a specific input from a supplier that is integrated within the boundaries of the firm or from an outsourced, unaffiliated supplier. Integrated and outsourced suppliers may differ with regard to several aspects such that there are various theories to explain firms’ organizational decisions. In this thesis, I contribute to this literature on the organizational decisions of multinational firms and extend it into various directions. In doing so, I mainly focus on the empirically highly relevant property rights approach. Within this approach it is assumed that firms’ organizational decisions are made in an environment with relationship-specific inputs and incomplete contracts (à la Grossman and Hart, 1986, and Hart and Moore, 1990). As the producer and the suppliers anticipate that a bargaining will arise after the production of their inputs, they have an incentive to underinvest. Outsourced and integrated suppliers both underinvest; however, to a different degree: An outsourced supplier has the property rights over his input and therefore expects to receive a higher revenue share in the bargaining than an integrated supplier that is basically an employee of the firm. Outsourcing thus implies more production incentives, i.e., ceteris paribus a lower underinvestment, for the supplier than integration. However, stated differently, outsourcing is also associated with lower production incentives for the producer. The seminal contributions of the property rights approach that consider this trade-off regarding the “make or buy”'-decision are by Antràs (2003) and Antràs and Helpman (2004) and consider a producer that contracts with one single input supplier. As, according to the UNCTAD (2004) report on transnational corporations and foreign affiliates, firms have on average considerably more than one supplier, these seminal contributions with one single supplier have been extended to settings with multiple suppliers. Following Baldwin and Venables’ (2013) classification of production processes, the considered production processes with multiple suppliers can be separated in so called “spider” and “snake” production processes. “Spiders” are production processes where a final good’s inputs enter in no particular order. Consider as an example the production of coffee capsules: Production of these capsules requires two inputs - the aluminium capsules and the coffee itself - that can be produced independent from each other. Contributions to explain firms’ organizational decisions in those “spiders” are made by Acemoglu, Antràs and Helpman (2007) and Schwarz and Suedekum (2014). Acemoglu, Antràs and Helpman (2007) consider a setup with multiple, completely symmetric suppliers - both with respect to the organizational forms and the input characteristics. In their model they hence determine endogenously the number of suppliers, however, either all suppliers are integrated or all suppliers are outsourced. Schwarz and Suedekum (2014) extend the analysis by headquarter services and the possibility to choose different organizational forms for different suppliers. They find the empirically relevant phenomenon of hybrid sourcing where some suppliers are kept within the boundaries of the firm, whereas others are outsourced. However, as inputs are assumed to be symmetric with regard to their specific characteristics, their model cannot explain which suppliers are integrated and which suppliers are outsourced with hybrid sourcing. In chapter 2, “Asymmetric spiders: Supplier heterogeneity and the organization of firms”, that is joint work with my supervisor Jens Suedekum and a former colleague, Christian Schwarz, and forthcoming in the Canadian Journal of Economics, we extend this work. We analyze organizational decisions in such a “spider” production process with possible asymmetries in the suppliers’ organizational forms and the suppliers’ input characteristics, as for example asymmetries in the suppliers’ technological importance for the final good. More precisely, we consider a property rights model of a firm with two heterogeneous suppliers and analyze which sourcing mode (outsourcing or vertical integration) is chosen for which of the two asymmetric inputs. We find that this decision crucially depends on the degree to which the two asymmetric components are substitutable: If they are close substitutes, the firm tends to outsource the technologically more important input while keeping the less important one inside the firm boundaries. This pattern can be reversed, however, if the two inputs are strongly complementary. The firm also tends to outsource low-cost inputs and components with low sophistication. We show that these theoretical predictions are consistent with numerous case studies and recent empirical evidence on the internal organization of firms. The third chapter “Make or buy - on the organizational structure of firms with asymmetric suppliers” that is also co-authored by Jens Suedekum and Christian Schwarz and published in a collected volume of MIT Press, is kind of a “spin-off” product of the second chapter. In the same setup as before - a production process with one headquarter firm and two heterogeneous suppliers who contribute essential inputs of varying importance - we explain in detail the Shapley value approach used as the solution concept for the multilateral bargaining. In doing so, we gradually derive the firm’s and the two suppliers’ marginal contributions and revenue shares, explain how revenue is distributed between the producer and the two suppliers and show the impact of variations of different parameters on this distribution. In the fourth chapter “The extra costs of outsourcing” that is joint work with Christian Schwarz, we still consider this “spider” setup with potential asymmetries in the characteristics of the suppliers’ inputs, but take into account additional approaches to explain firms’ organizational decisions. More precisely, whereas within the property rights approach, i.e., within the approach used so far, integrated and outsourced suppliers differ with regard to their investment incentives, it is argued in other contributions to the literature that integration might also be associated with economies of scope, i.e., that outsourcing induces costs. We give a detailed review of the literature and introduce extra costs of outsourcing into the previous setup. The organizational decision is then driven by two countervailing effects: The ownership rights effect favors outsourcing of a more important input, while the “indirect” effect via the suppliers’ costs favors vertical integration. We derive sharp testable predictions in how far this indirect effect influences the producer’s decision to keep the key inputs vertically integrated inside the firm’s boundaries. Chapter 5 differs from the last three chapters as it considers a “snake” production process. In contrast to “spiders”, in “snake” production processes the inputs enter the production process in a particular order. The typical example for such a sequential production is Henry Ford's original Model T production assembly line. Antràs and Chor (2013) analyze a firm’s organizational structure in such a sequential “snake” production process. They assume that the headquarter makes all organizational decisions along the value chain and find that these decisions depend on the respective’s input position in the value chain and whether inputs are sequential complements or substitutes. In this fifth - single-authored - chapter, “Organizational decisions in multistage production processes”, I argue that organizational decisions in multistage production processes are not always made by the downstream headquarter firm, but by the various intermediate inputs suppliers along the value chain themselves. To explain organizational decisions in those cases, I assume a production process with one headquarter (final good producer) and two suppliers at different positions within the chain. In this environment with incomplete contracts and relationship-specific investments, the firm decides only on the organizational form of her direct supplier, who in turn decides whether to outsource or to vertically integrate his own supplier. I find that the producer’s and the supplier’s organizational decisions are interrelated, particularly when production decisions occur sequentially. For instance, my model predicts that a higher technological importance of the downstream supplier raises the probability that the upstream supplier is vertically integrated. I also compare my model to the above “snake” framework by Antràs and Chor (2013). Then, I assume firms to be able to freely decide on their organizational decision structure and find for instance that firms with a higher overall productivity are more likely to choose a structure where the suppliers decide themselves on their suppliers’ organizational forms. To take into account the fear of firms to lose their knowledge to a competitor, I combine the property rights approach with the knowledge protection approach in the sixth - also single-authored - chapter, “The decision whether to integrate or to outsource - combining ex ante distortions and ex post inefficiencies”. To simplify the analysis, I return to the seminal contributions of Antràs (2003) and Antràs and Chor (2004) and consider a one-supplier-setup where final good production requires a firm’s headquarter services and a foreign supplier’s manufacturing input. Firms that decide whether to choose integration or outsourcing of the supplier for the provision of the input do not only have to consider the ex ante investment incentives that influence the own and the supplier’s underinvestment problem. Instead, firms also have to take into account the ex post risk that the supplier absorbs the producer’s knowledge to become a competitor for the final good, both under outsourcing and integration. In line with the outcome of the knowledge protection approach, with an exogenous probability of such ex post inefficiencies associated with one particular organizational form, this organizational form becomes less likely. However, considering the supplier’s incentives to become a competitor, integrated suppliers are more likely to become a competitor than outsourced suppliers such that outsourcing becomes per se more likely. As a competitor lowers the producer’s profit, the producer might have an incentive to deter the supplier from becoming a competitor. More precisely, the producer has this incentive whenever the supplier’s manufacturing input is not too important for the production. Chapter 7 summarizes the main new insights resulting from the analysis in this thesis.
Lizenz:	Urheberrechtsschutz
Fachbereich / Einrichtung:	Wirtschaftswissenschaftliche Fakultät » Volkswirtschaftslehre
Dokument erstellt am:	16.11.2016
Dateien geändert am:	16.11.2016
Promotionsantrag am:	24.06.2016
Datum der Promotion:	27.09.2016