“Globalization” and Vertical Structure
Year: 2000
Type: article
Abstract: This paper analyzes the effects of international openness on vertical integration. Vertical integration can confer a negative externality, by thinning the market for inputs and thus worsening opportunism problems; this induces strategic complementarity and multiple equilibria in the integration decision, thus providing a theory of different “industrial systems” or “industrial cultures” in ex ante identical countries. International openness thickens the market, facilitating leaner, less integrated firms, thus providing gains from international openness quite different from those that are familiar from trade theory. This may be taken as one theory of “outsourcing,” “downsizing,” and “Japanization” as consequences of “globalization.” (JEL D23, F15, L22)
Source: American Economic Review
Author: John McLaren
Institutions: National Bureau of Economic Research, University of Virginia
Language: English
Topic: Global trade and economics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1990821161