A THEORY OF FIRM SCOPE
Name
Hart-2010-A THEORY OF FIRM SCOPE.pdf
Size
199.79 KB
Format
Adobe PDF
Checksum (MD5)
45b2183432ff386c6e3337e6625e2798
Author(s)
Hart, Oliver
Holmstrom, Bengt
Date Issued
May 2010
Journal
Quarterly Journal of Economics
Publisher
MIT Press
Citation
Hart, Oliver, and Bengt Holmstrom. “A Theory of Firm Scope.” Quarterly Journal of Economics 125.2 (2010): 483-513. © 2010 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Version
Final published version
Abstract
The formal literature on firm boundaries has assumed that ex post conflicts are resolved through bargaining. In reality, parties often simply exercise their decision rights. We develop a model, based on shading, in which the use of authority has a central role. We consider two firms deciding whether to adopt a common standard. Nonintegrated firms may fail to coordinate if one firm loses. An integrated firm can internalize the externality, but puts insufficient weight on employee benefits. We use our approach to understand why Cisco acquired StrataCom, a provider of new transmission technology. We also analyze delegation.
MIT Department
Massachusetts Institute of Technology. Department of Economics
Terms of Use
Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
Persistent DSpace Link
DOI of Published Version
http://dx.doi.org/10.1162/qjec.2010.125.2.483
