Altomonte, Carlo and Rungi, Armando Global supply chains and international competitiveness. Working Paper #4/2014 Robert Schuman Centre for Advanced Studies. Research Paper RSCASFull text not available from this repository.
The emergence of global supply chains, that is the organization of production processes in factories that are part of a network of suppliers located in different countries and specialized in specific production phases, brings about a number of major changes in the way the global economy works and interacts. To explore more in detail this phenomenon from a microeconomic perspective, in this paper we provide evidence on Business Groups, that is network-like forms of hierarchical organization between legally autonomous firms spanning both within and across national borders. Exploiting a unique dataset of 270,474 headquarters controlling more than 1,500,000 (domestic and foreign) affiliates in all countries worldwide, we find that business groups account for a significant part of value-added generation in both developed and developing countries, with a prevalence in the latter. In order to characterize their boundaries, we introduce an entropy-like metric able to summarize the hierarchical complexity of a group and its trade-off between exploitation of knowledge as an input across the hierarchy and the associated communication costs. When relating these metrics to the performance of affiliates across business groups, we find a robust (albeit non-linear) positive relationship between a group’s hierarchical complexity and productivity which dominates the already known correlation between vertical integration and productivity. Results are in line with the theoretical framework of knowledge-based hierarchies developed by the literature, in which intangible assets are a complementary input in the production processes.
|Item Type:||Working Paper (Working Paper)|
|Uncontrolled Keywords:||supply chains; hierarchies; business groups; property rights; organization of production; productivity|
|Subjects:||H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor
|Research Area:||Economics and Institutional Change|
|Depositing User:||Ms T. Iannizzi|
|Date Deposited:||12 May 2014 09:45|
|Last Modified:||12 May 2014 09:46|
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