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| McLaren, John. |
| This paper provides an economic theory of the degree of formality in industrial procurement. The argument is based on a tension between two procurement goals: imposing cost discipline on the supplier, and creating the conditions for cooperative innovation. In this model, a contract can solve the cost discipline problem, but only by discouraging cooperation; a less formal arrangement provides cooperation but poor discipline. The attractiveness of contracts is smaller, the less vertically integrated the industry, because a thick market for inputs provides its own discipline incentives even without a contract. Thus, in highly integrated industries, contracts are used, while in less integrated industries business is done on handshakes. This theory of the role... |
| Tipo: Working or Discussion Paper |
Palavras-chave: Japan-US comparisons; Subcontracting; Cooperative innovation; Industrial Organization; L14; L22. |
| Ano: 1996 |
URL: http://purl.umn.edu/28407 |
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