The Impact of Vertical Integration and Outsourcing on Firm Efficiency: Evidence from the Italian Machine Tool Industry

In this paper we made use of an econometric approach to efficiency analysis in order to capture the role of vertical integration and outsourcing on firm's efficiency. Vertical integration is considered an indicator of structure, while outsourcing represents the process of its change. We consider inefficiency measures as indicators of organizational heterogeneity, related to the firm's choices regarding the phases of the production process that are under its control. We find support for the hypothesis of a relationship between vertical integration and efficiency. The results on outsourcing activity, and in particular the interaction between outsourcing and vertical structure, indicate that heterogeneous patterns, far from tending to cancel out each other as a consequence of common external changes, are reinforcing. Moreover, the sensitivity of inefficiency variance to the cycle, indicate that different firms may have different dynamic properties

The imperfect hiding : some introductory concepts and preliminary issues on modularity

In this work we present a critical assessment of some problems and open questions on the debated notion of modularity. Modularity is greatly in fashion nowadays, being often proposed as the new approach to complex artefact production that enables to combine fast innovation pace, enhanced product variety and reduced need for co-ordination. In line with recent critical assessments of the managerial literature on modularity, we sustain that modularity is only one among several arrangements to cope with the complexity inherent in most high-technology artefact production, and by no means the best one. We first discuss relations between modularity and the broader (and much older within economics) notion of division of labour. Then we sustain that a modular approach to labour division aimed at eliminating technological interdependencies between components or phases of a complex production process may have, as a by-product, the creation of other types of interdependencies which may subsequently result in inefficiencies of various types. Hence, the choice of a modular design strategy implies the resolution of various tradeoffs. Depending on how such tradeoffs are solved, different organisational arrangements may be created to cope with ‘residual’ interdependencies. Hence, there is no need to postulate a perfect isomorphism, as some recent literature has proposed, between modularity at the product level and modularity at the organisational level

Vertical Integration and Efficiency: an application to the Italian Machine Tool Industry.

This paper analyzes the relationship between firm efficiency and vertical integration in the Italian machine tool (MT) industry. A theoretical model of entry and competition within an industry has been set up. In this model firms can choose either to be vertically integrated or not: the most efficientfirms self-select in being vertically integrated, while less efficientfirms prefer a disintegrated structure and they both coexist in equilibrium. In the second part of the paper the relationship between efficiency and vertical integration has been tested using a stochastic frontier framework in an novel panel dataset including around 500 MT builders. The theoretical prediction is confirmed: outsourcing seems a rational choice for less efficient firms to make positive operating profits and stay in the market; on the other hand, more efficient firms exploit their efficiency advantage to control a greater part of the production chain, possibly benefiting from greater coordination among different phases and tailored intermediate inputs.vertical integration; technical efficiency; firm heterogeneity; heteroskedastic frontier model

Simplified preferences, voting, and the power of combination.

In this paper we interpreted the decision to vote for a particular party as a process of delegation to decision makers having a simplified system of preferences. Each person in a population votes for the political party that place priority on one or more issues that they consider important. Moreover, on the basis of a survey on preferences of population, we have simulated a delegation procedure which chart the selection process of a particular party. Finally, making use of noncommutative harmonic analysis, we decomposed the delegation function, and isolated the effect of a particular affinity, or a combination of either the pair of items that characterize a party. We used noncommutative harmonic analysis as an application of some results obtained by Michael E. Orrison and Brian L. %%@ Lawson in relation to spectral analysis applied in voting in political committees.

The imperfect hiding: Some introductory concepts and preliminary issues on modularity.

In this work we present a critical assessment of some problems and open questions on the debated notion of modularity. Modularity is greatly in fashion nowadays, being often proposed as the new approach to complex artefact production that enables to combine fast innovation pace, enhanced product variety and reduced need for co-ordination. In line with recent critical assessments of the managerial literature on modularity, we sustain that modularity is only one among several arrangements to cope with the complexity inherent in most high-technology artefact production, and by no means the best one. We first discuss relations between modularity and the broader (and much older within economics) notion of division of labour. Then we sustain that a modular approach to labour division aimed at eliminating technological interdependencies between components or phases of a complex production process may have, as a by-product, the creation of other types of interdependencies which may subsequently result in inefficiencies of various types. Hence, the choice of a modular design strategy implies the resolution of various tradeoffs. Depending on how such tradeoffs are solved, different organisational arrangements may be created to cope with 'residual' interdependencies. Hence, there is no need to postulate a perfect isomorphism, as some recent literature has proposed, between modularity at the product level and modularity at the organisational level.

The Impact of Vertical Integration and Outsourcing on Firm Efficiency: Evidence from the Italian Machine Tool Industry.

In this paper we made use of an econometric approach to efficiency analysis in order to capture the role of vertical integration and outsourcing on firm's efficiency. Vertical integration is considered an indicator of structure, while outsourcing represents the process of its change. We consider inefficiency measures as indicators of organizational heterogeneity, related to the firm's choices regarding the phases of the production process that are under its control. We find support for the hypothesis of a relationship between vertical integration and efficiency. The results on outsourcing activity, and in particular the interaction between outsourcing and vertical structure, indicate that heterogeneous patterns, far from tending to cancel out each other as a consequence of common external changes, are reinforcing. Moreover, the sensitivity of inefficiency variance to the cycle, indicate that different firms may have different dynamic properties.vertical integration; outsourcing; technical efficiency; double heteroskedastic model

Spilli, orologi e macchine da calcolo : divisione e ricomposizione del lavoro per gli economisti classici (e i moderni)

Nel pensiero di alcuni economisti classici (Smith, Babbage, Marx e Marshall) si rinviene l’origine di due tradizioni interpretative dell’impresa capitalistica, intesa come istituzione in grado di gestire la divisione del lavoro. La prima è connessa all’idea di indivisibilità dei fattori e di rendimenti crescenti: questa visione dà origine all’idea di impresa come meccanismo di soluzione di conflitti. La seconda matrice presenta l’impresa come meccanismo per la produzione di razionalità decisionale; in questa visione si evidenzia il ruolo che assumono nell’impresa i meccanismi di scoperta e di coordinamento. Le due visioni, tuttavia, sono state accolte in ambiti teorici diversi e in larga parte reciprocamente isolati: pur con alcune eccezioni, la moderna teoria dell’impresa evidenzia gli aspetti dell’impresa connessi al conflict solving; la sociologia delle organizzazioni e il management science sottolineano invece il ruolo delle organizzazioni come meccanismo di problem solving in presenza di complessità e di limiti alla razionalità

Stochastic learning in co-ordination games : a simulation approach

In the presence of externalities, consumption behaviour depends on the solution of a co-ordination problem. In our paper we suggest a learning approach to the study of co-ordination in consumption contexts where agents adjust their choices on the basis of the reinforcement (payoff) they receive during the game. The results of simulations allowed us to distinguish the roles of different aspects of learning in enabling co-ordination within a population of agents. Our main results highlight: 1. the role played by the speed of learning in determining failures of the co-ordination process; 2. the effect of forgetting past experiences on the speed of the co-ordination process; 3. the role of experimentation in bringing the process of co-ordination into an efficient equilibrium

Spilli, orologi e macchine da calcolo - Divisione e ricomposizione del lavoro per gli economisti classici (e i moderni) . (In Italian).

Nel pensiero di alcuni economisti classici (Smith, Babbage, Marx e Marshall) si rinviene l'origine di due tradizioni interpretative dell'impresa capitalistica, intesa come istituzione in grado di gestire la divisione del lavoro. La prima è connessa all'idea di indivisibilità dei fattori e di rendimenti crescenti: questa visione dà origine all'idea di impresa come meccanismo di soluzione di conflitti. La seconda matrice presenta l'impresa come meccanismo per la produzione di razionalità decisionale; in questa visione si evidenzia il ruolo che assumono nell'impresa i meccanismi di scoperta e di coordinamento. Le due visioni, tuttavia, sono state accolte in ambiti teorici diversi e in larga parte reciprocamente isolati: pur con alcune eccezioni, la moderna teoria dell'impresa evidenzia gli aspetti dell'impresa connessi al conflict solving; la sociologia delle organizzazioni e il management science sottolineano invece il ruolo delle organizzazioni come meccanismo di problem solving in presenza di complessità e di limiti alla razionalità.

La caduta della produttivita' industriale in Italia e nelle regioni del Nord Est: una rilettura

Il lavoro riconsidera l'andamento della produttivita' industriale in Italia nel decennio precedente la crisi, impiegando un vasto database di microdati di impresa. Particolare attenzione è dedicata all’evoluzione della produttività dei principali comparti della manifattura nel Nord Est in relazione alle altre aree del paese. Viene calcolato, con tecniche non parametriche robuste, e scomposto l'indice di produttività di Malmquist per l'intero periodo e per tre sottoperiodi. Si verifica che sotto al generale rallentamento della produttività stanno fenomeni molto diversi: in una prima parte del decennio il rallentamento è dovuto al basso avanzamento tecnologico, mentre nella seconda parte del periodo la frontiera tecnologica si sposta, ma il conseguente effetto positivo sulla crescita della produttività è contrastato, al tempo stesso, dalla comparsa di inefficienze produttive che allontanano mediamente le imprese dalla frontiera. Tali evidenze empiriche, generalizzate a diversi settori, sono discusse alla luce della letteratura esistente sulla produttività e sembrano riconciliare le due opposte visioni che si sono affermate nell'interpretazione della recente evoluzione della struttura industriale italiana, e in particolare di quella di piccole e medie dimensioni diffusa nel Nord Est: l'una che sottolinea la difficoltà delle imprese italiane di collocarsi sulla frontiera dell'avanzamento tecnologico; l'altra che evidenzia la presenza attiva di una numerosa popolazione di medie imprese ad alta produttività.Produttivita' Totale dei Fattori, Malmquist.