Working Paper: CEPR ID: DP4242
Authors: Assar Lindbeck; Dennis Snower
Abstract: This Paper presents a new approach to the theory of the firm by identifying factor complementarities as central to the determination of the firm?s boundaries. The factor complementarities may take a variety of forms: technological and informational complementarities, as well as economies of scale and scope. We examine the trade-off between the gains from these complementarities and transactions costs. In so doing, we must abandon the standard dichotomy between the determinants of plant size and firm size. The influence of factor complementarities on firm size is examined in partial and general equilibrium frameworks.
Keywords: Economies of scale and scope; Factor complementarities; Firm; Transaction costs
JEL Codes: D21; D23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| factor complementarities (D10) | firm boundaries (F23) |
| technological complementarities (O33) | firm boundaries (F23) |
| informational complementarities (D83) | firm boundaries (F23) |
| economies of scale and scope (F12) | firm boundaries (F23) |
| transaction costs (D23) | firm boundaries (F23) |
| factor complementarities + transaction costs (F12) | firm boundaries (F23) |