Toward an integrated theory of the firm: The interplay between internal organization and vertical integration

Two central issues in strategic management are the determination of a firm's internal delegation and its vertical boundaries. Despite the importance of these issues, there is scant analysis concerning their interaction. Using a comprehensive database of the construction industry, we show that vertical integration positively influences the centralization decision and that the main mechanism driving this relationship is an improvement in the hierarchically coordinated adaptation of firm activities when complexity and uncertainty are high. We also observe that centralization is negatively related to the extent of relational contracts between principals and agents, and positively related to an exogenous increase in the cost of employee layoffs. Our results suggest that managers cannot consider firm boundaries and internal organization to be independent decisions

Firm, industry and corporation effects revisited: a mixed multilevel analysis for Chilean companies

The relative importance of the corporate, industry and firm effects on business performance has been studied profusely in the literature. Until now, little has been said about the nested structure of the problem. The multilevel analysis appears as a good alternative over the approaches used so far to better understand this phenomenon. This article analyses the significance of the aforesaid effects on Chilean firms and assesses the impact of various regressors on residual variances. The export intensity of firms and industries proved to have a significant impact on the estimated industry effect, making the industry-related variance statistically not different from zero. However, the industry's influence did not totally disappear, because the effect of export intensity on firms' profitability depends on the industry to which the firm belongs. Moreover, firm size turns out to be significant and positively associated with firm's return, which can be evidence of economies of scale or more efficient processes as a company grows in size.