Contracting institutions and firm boundaries

Arbeitspapier

Contractual frictions are widely known to shape firm boundaries. But do better contracting institutions, which reduce these frictions, induce firms to be more or less deeply integrated? This paper provides a large-scale investigation of this question using a unique micro dataset of ownership shares across half a million firm pairs worldwide. We uncover strong evidence that better contracting institutions in subsidiaries' countries favor deeper integration, particularly in relationship-specific industries. We formally show that these findings can be explained by a generalized Property-Rights Theory of the firm featuring partial ownership, while they are at odds with the canonical Transaction-Cost Theory.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: University of Tübingen Working Papers in Economics and Finance ; No. 100

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 boundaries ; contracting institutions ; multinational firms ; property-rights theory ; firmlevel analysis

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): 2017

Further information

• Handle: http://hdl.handle.net/10419/169392
• URN: urn:nbn:de:bsz:21-dspace-777964