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The Firm as a Pool of Factor Complementarities

Author

Listed:
  • Lindbeck, Assar

    (Stockholm University)

  • Snower, Dennis J.

    (Hertie School of Governance)

Abstract
This paper presents a new approach to the theory of the firm by identifying factor complementarities as central to the determination of the firm’s boundaries. The factor complementarities may take a variety of forms: technological and informational complementarities, as well as economies of scale and scope. We examine the tradeoff between the gains from these complementarities and transactions costs. In so doing, we must abandon the standard dichotomy between the determinants of plant size and firm size. The influence of factor complementarities on firm size is examined in partial and general equilibrium frameworks.

Suggested Citation

  • Lindbeck, Assar & Snower, Dennis J., 2003. "The Firm as a Pool of Factor Complementarities," IZA Discussion Papers 882, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp882
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    References listed on IDEAS

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    1. Baumol, William J, 1982. "Contestable Markets: An Uprising in the Theory of Industry Structure," American Economic Review, American Economic Association, vol. 72(1), pages 1-15, March.
    2. Lindbeck, Assar & Snower, Dennis J, 1996. "Reorganization of Firms and Labor-Market Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 315-321, May.
    3. Patrick Bolton & Mathias Dewatripont, 1994. "The Firm as a Communication Network," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(4), pages 809-839.
    4. Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 324-340, Autumn.
    5. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-795, December.
    6. Grout, Paul A, 1984. "Investment and Wages in the Absence of Binding Contracts: A Nash Bargining Approach," Econometrica, Econometric Society, vol. 52(2), pages 449-460, March.
    7. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
    8. Fudenberg, Drew & Tirole, Jean, 1989. "Noncooperative game theory for industrial organization: An introduction and overview," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 5, pages 259-327, Elsevier.
    9. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
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    Cited by:

    1. Alla Lileeva & Johannes Van Biesebroeck, 2013. "Outsourcing When Investments Are Specific And Interrelated," Journal of the European Economic Association, European Economic Association, vol. 11(4), pages 871-896, August.
    2. Werner Hölzl, 2005. "The evolutionary theory of the firm: Routines, complexity and change," Working Papers geewp46, Vienna University of Economics and Business Research Group: Growth and Employment in Europe: Sustainability and Competitiveness.
    3. Hwan-Joo Seo & Young Soo Lee & Jai-Joon Hur & Jin Ki Kim, 2012. "The impact of information and communication technology on skilled labor and organization types," Information Systems Frontiers, Springer, vol. 14(2), pages 445-455, April.
    4. Horst Raff & Michael J. Ryan, 2008. "Firm-Specific Characteristics and the Timing of Foreign Direct Investment Projects," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 144(1), pages 1-31, April.
    5. Madalina Constantinescu, 2008. "Knowledge Management Through The Lens Of Innovation And Labour Productivity In A Knowledge Based Economy," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 3(2(4)_Summ).
    6. Riccardo Leoni & Giuseppe Usai, 2004. "Organizations Between Systemic and Epistemological Complexities. An Introduction," Rivista di Politica Economica, SIPI Spa, vol. 94(1), pages 3-25, January-F.
    7. Aurora Garc𫑇allego & Nikolaos Georgantz & Joan Mart󻑍ontaner & Teodosio P鲥z-Amaral, 2015. "(How) Do research and administrative duties affect university professors' teaching?," Applied Economics, Taylor & Francis Journals, vol. 47(45), pages 4868-4883, September.
    8. Arvanitis, Spyros & Loukis, Euripidis N., 2009. "Information and communication technologies, human capital, workplace organization and labour productivity: A comparative study based on firm-level data for Greece and Switzerland," Information Economics and Policy, Elsevier, vol. 21(1), pages 43-61, February.
    9. Tobias Stucki & Daniel Wochner, 2019. "Technological and organizational capital: Where complementarities exist," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(3), pages 458-487, June.

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    More about this item

    Keywords

    firm; complementarities; plant;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence

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