Organizational Industrial Organization Around the World
Saturday, Jan. 7, 2017 5:30 PM – 7:15 PM
- Chair: Laura Alfaro, Harvard Business School
Vertical Integration and Relational Contracts: Evidence from the Costa Rican Coffee Chain
AbstractWhen contracts are incomplete, market trade might be substituted by relational contracts or integration. This paper compares vertical integration and relational contracts between coffee mills and buyers in Costa Rica. Detailed data on transactions between and within firms reveal that integrated trade is shielded from demand uncertainty, a key force shaping market transactions. Relational contracts between firms display trading patterns qualitatively similar to those within integrated chains but do not achieve the same degree of market assurance. Integration, however, comes at the cost of worse relationships with independent suppliers. The evidence strongly supports models in which firms' boundaries alter temptations to renege on relational contracts and, consequently, the allocation of resources. Policy implications for export-oriented agricultural chains in developing countries are discussed.
Digging Deep to Compete: Vertical Integration, Product Market Competition and Prices
AbstractThis article establishes a causal effect of product market competition on vertical integration. The identfication strategy exploits a natural experiment in the US coal mining industry. Railroad deregulation caused an increase in product market competition among eastern but not observationally similar western mines. Using difference-in-difference estimations I find that following the increase in product market competition the incidence of vertical integration fell by 33% within the treatment group. This stems from falling market prices. The results illustrate how firms redesign their organizational structure in response to changes in their environment. I discuss several possible interpretations of these changes.
Branch Location Strategies and Financial Service Access in Thai Banking
AbstractThe location of bank branches is an important determinant of access to financial services, particularly in developing countries. We study the location strategies of banks in Thailand since the 1990s. Thailand underwent a series of policy reforms in this area, as well as a large financial crisis, which substantially affected location strategies. We estimate a dynamic structural model of oligopolistic location choice, allowing for complementarity in payoffs for banks in nearby locations. We also measure the relationship between bank locations and measures of financial access. We consider the impact of counterfactual policy regimes on both bank locations and the resulting financial access.
- L2 - Firm Objectives, Organization, and Behavior
- O1 - Economic Development