A THEORY OF FIRM SCOPE
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 whethe...
| Main Authors: | , |
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| Other Authors: | |
| Format: | Article |
| Language: | en_US |
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MIT Press
2010
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| Online Access: | http://hdl.handle.net/1721.1/58806 https://orcid.org/0000-0002-4846-1709 |
| _version_ | 1826197374970626048 |
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| author | Hart, Oliver Holmstrom, Bengt |
| author2 | Massachusetts Institute of Technology. Department of Economics |
| author_facet | Massachusetts Institute of Technology. Department of Economics Hart, Oliver Holmstrom, Bengt |
| author_sort | Hart, Oliver |
| collection | MIT |
| description | 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. |
| first_indexed | 2024-09-23T10:46:43Z |
| format | Article |
| id | mit-1721.1/58806 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T10:46:43Z |
| publishDate | 2010 |
| publisher | MIT Press |
| record_format | dspace |
| spelling | mit-1721.1/588062022-09-30T22:57:42Z A THEORY OF FIRM SCOPE Hart, Oliver Holmstrom, Bengt Massachusetts Institute of Technology. Department of Economics Holmstrom, Bengt Holmstrom, Bengt 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. National Science Foundation (U.S.) 2010-09-30T20:22:40Z 2010-09-30T20:22:40Z 2010-05 2010-04 Article http://purl.org/eprint/type/JournalArticle 0033-5533 1531-4650 http://hdl.handle.net/1721.1/58806 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. https://orcid.org/0000-0002-4846-1709 en_US http://dx.doi.org/10.1162/qjec.2010.125.2.483 Quarterly Journal of Economics 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. application/pdf MIT Press MIT Press |
| spellingShingle | Hart, Oliver Holmstrom, Bengt A THEORY OF FIRM SCOPE |
| title | A THEORY OF FIRM SCOPE |
| title_full | A THEORY OF FIRM SCOPE |
| title_fullStr | A THEORY OF FIRM SCOPE |
| title_full_unstemmed | A THEORY OF FIRM SCOPE |
| title_short | A THEORY OF FIRM SCOPE |
| title_sort | theory of firm scope |
| url | http://hdl.handle.net/1721.1/58806 https://orcid.org/0000-0002-4846-1709 |
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