Determinants of Firm Boundaries: Empirical Analysis of the Japanese Auto Industry from 1984 to 2002

We have assessed the determinants of the choice of integration, relational contracting (keiretsu sourcing) and market sourcing by seven Japanese automobile manufacturers (OEMs) with respect to 54 components in light of contract economics. Our major findings are the following. First, the specificity and interdependency of a component significantly promotes vertical integration over keiretsu and keiretsu over market, consistent with transaction cost economics. Second, interdependency is a more important consideration for the former choice than for the latter choice, and the reverse is the case for specificity. This suggests that the hold-up risk due to specific investment can be often effectively controlled by a relational contracting based on keiretsu sourcing, while accommodating non-contractible design changes may often require vertical integration. Third, while higher testability of a component makes the effects of specificity significantly smaller, it also promotes the choice of keiretsu sourcing over market sourcing. One interpretation of this last result is that while higher testability improves the contractibility of the component with high specificity, it simultaneously enhances the advantage of keiretsu sourcing since it provides more opportunities for the supplier to explore new information for a collaborative exploitation with an OEM.

The resilience of interdependent transportation networks under targeted attack

Modern world builds on the resilience of interdependent infrastructures characterized as complex networks. Recently, a framework for analysis of interdependent networks has been developed to explain the mechanism of resilience in interdependent networks. Here we extend this interdependent network model by considering flows in the networks and study the system's resilience under different attack strategies. In our model, nodes may fail due to either overload or loss of interdependency. Under the interaction between these two failure mechanisms, it is shown that interdependent scale-free networks show extreme vulnerability. The resilience of interdependent SF networks is found in our simulation much smaller than single SF network or interdependent SF networks without flows.Comment: 5 pages, 4 figure

Stochastic modelling of the effects of interdependencies between critical infrastructure

An approach to Quantitative Interdependency Analysis, in the context of Large Complex Critical Infrastructures, is presented in this paper. A Discrete state–space, Continuous–time, Stochastic Process models the operation of critical infrastructure, taking interdependencies into account. Of primary interest are the implications of both model detail (that is, level of model abstraction) and model parameterisation for the study of dependencies. Both of these factors are observed to affect the distribution of cascade–sizes within and across infrastructure

The Components and Boundaries of Mechanisms

Mechanisms are said to consist of two kinds of components, entities and activities. In the first half of this chapter, I examine what entities and activities are, how they relate to well-known ontological categories, such as processes or dispositions, and how entities and activities relate to each other (e.g., can one be reduced to the other or are they mutually dependent?). The second part of this chapter analyzes different criteria for individuating the components of mechanisms and discusses how real the boundaries of mechanisms are

Logic analysis of complex systems by characterizing failure phenomena to achieve diagnosis and fault-isolation

A recent result shows that, for a certain class of systems, the interdependency among the elements of such a system together with the elements constitutes a mathematical structure a partially ordered set. It is called a loop free logic model of the system. On the basis of an intrinsic property of the mathematical structure, a characterization of system component failure in terms of maximal subsets of bad test signals of the system was obtained. Also, as a consequence, information concerning the total number of failure components in the system was deduced. Detailed examples are given to show how to restructure real systems containing loops into loop free models for which the result is applicable

Mitigating Cascading Failures in Interdependent Power Grids and Communication Networks

In this paper, we study the interdependency between the power grid and the communication network used to control the grid. A communication node depends on the power grid in order to receive power for operation, and a power node depends on the communication network in order to receive control signals for safe operation. We demonstrate that these dependencies can lead to cascading failures, and it is essential to consider the power flow equations for studying the behavior of such interdependent networks. We propose a two-phase control policy to mitigate the cascade of failures. In the first phase, our control policy finds the non-avoidable failures that occur due to physical disconnection. In the second phase, our algorithm redistributes the power so that all the connected communication nodes have enough power for operation and no power lines overload. We perform a sensitivity analysis to evaluate the performance of our control policy, and show that our control policy achieves close to optimal yield for many scenarios. This analysis can help design robust interdependent grids and associated control policies.Comment: 6 pages, 9 figures, submitte

Current capabilities, requirements and a proposed strategy for interdependency analysis in the UK

The UK government recently commissioned a research study to identify the state-of-the-art in Critical Infrastructure modelling and analysis, and the government/industry requirements for such tools and services. This study (Cetifs) concluded with a strategy aiming to bridge the gaps between the capabilities and requirements, which would establish interdependency analysis as a commercially viable service in the near future. This paper presents the findings of this study that was carried out by CSR, City University London, Adelard LLP, a safety/security consultancy and Cranfield University, defense academy of the UK

Enhancing Infrastructure Resilience Under Conditions of Incomplete Knowledge of Interdependencies

Today’s infrastructures — such as road, rail, gas, electricity and ICT — are highly interdependent, and may best be viewed as multi-infrastructure systems. A key challenge in seeking to enhance the resilience of multi-infrastructure systems in practice relates to the fact that many interdependencies may be unknown to the operators of these infrastructures. How can we foster infrastructure resilience lacking complete knowledge of interdependencies? In addressing this question, we conceptualize the situation of a hypothetical infrastructure operator faced with incomplete knowledge of the interdependencies to which his infrastructure is exposed. Using a computer model which explicitly represents failure propagations and cascades within a multi-infrastructure system, we seek to identify robust investment strategies on the part of the operator to enhance infrastructure resilience. Our results show that a strategy of constructing redundant interdependencies may be the most robust option for a financially constrained infrastructure operator. These results are specific to the infrastructure configuration tested. However, the developed model may be tailored to the conditions of real-world infrastructure operators faced with a similar dilemma, ultimately helping to foster resilient infrastructures in an uncertain world