Contracting institutions and firm integration around the world

Arbeitspapier

Firm integration is fundamentally shaped by contractual frictions. But do better contracting institutions, reducing these frictions, induce firms to be more or less deeply integrated? To address this question, this paper exploits unique micro data on ownership shares across more than 200,000 firm pairs worldwide, including domestic and cross-border ownership links. We uncover a new stylized fact: Firms choose higher ownership shares in subsidiaries located in countries with better contracting institutions. We develop a Property-Rights Theory of the multinational firm featuring partial ownership that rationalizes this pattern and guides our econometric analysis. The estimations demonstrate that better contracting institutions favor deeper integration, in particular in relationship-specific industries.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: University of Tübingen Working Papers in Business and Economics ; No. 148

Classification and Topics

• Classification: Wirtschaft ; International Investment; Long-term Capital Movements ; Multinational Firms; International Business ; Institutions: Design, Formation, Operations, and Impact ; Organizational Behavior; Transaction Costs; Property Rights ; Transactional Relationships; Contracts and Reputation; Networks ; Organization of Production
• Subject: firm integration ; contracting institutions ; multinational firms ; Property-Rights Theory ; ownership shares

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Eppinger, Peter S. ; Kukharskyy, Bohdan
• Event: Veröffentlichung
• (who): University of Tübingen, Faculty of Economics and Social Sciences
• (where): Tübingen
• (when): 2021

Further information

• DOI: doi:10.15496/publikation-57694
• Handle: http://hdl.handle.net/10419/235512
• URN: urn:nbn:de:bsz:21-dspace-1163193
• Last update: 10.03.2025, 11:43 AM CET