Mario Baldassarri, Luigi Paganetlo and Edmund S. Phelps (L'ditor,L
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CENTRAL ISSUES IN CONTEMI'ORARY ECONOMIC TIIEORY AND POLICY General Editor: Gustavo I'iga, ,\f1ll1(ISinS /:.'ilit<l', Ril'isfil di I'olitica E((JII(Jllli(<I, RonI<', Italy l'nlJlisileil tilll's ille/IIII!': Mario Baldassarri, Luigi Paganetlo and Edmund S. Phelps (l'ditor,l) INTERNATION,\L ECONOMIC INTERDEPENDENCE, l'AlTERNS OF TRADE BALANCES AND ECONOMIC POLICY COORDINATION Mario Baldas~rri (edi/or) KEYNES AND TilE ECONO MIC PO LICiES OI'TIIE 1980s MariO Ilaldas~rri (rili/or) OLlGOI'OLY AND DYNAMIC COMI'ETITION Mario Baldassarri (rili/or) TilE ITALI AN ECONOMY Heaven o r 1Ie1l? Mario Baldas~rri and Paolo Annunziato (CliilofS) IS THE ECONOMIC cycn: STILL ALI VE? Theory. EVidence and Policies Mario Baldas~rri.J o hn McCallum and Robert ,\ , Mundell (rr/i/(m) DEBT, DEFICIT AND ECONOMIC PERFORMANCE Mario Baldassarri,John McCallum and Robert A. M\lIldeli (rditors) GI.OBALOISEQUILIURIUM IN TilE WORLD ECO NOMY MariO Baldassarri and Robert A, Mundell (I'ili/III):) llUILOING THE NEW EUROPE VOIS Iii: II Mario Baldassari (('ililor) PRIVAnz,\TION PROCESSES IN Ei\SrERN EUROPE Theoretical I'oundations and Em pirical Result s (Vo ls I IS II) Mario Ilaldassarri (rilitor) HOW TO REDUCE UNEMPLOYMENT IN EUROPE MariO Baldas~rri (rili/lir) TH E NEW WELFAR E Unemployment and Socia l Security in Eu rope Maria Baldassarri, Michele Bage lla and Luigi Paganeno (edi/ors) FlNANCII\L M,\RKETS Imperfe<:j Info rmation and Risk Management Mario Baldassarri and llruno Chiarini (rili/or.l) STUDIES IN L,\IlOUR MARKETS AND INDU ~'TRIAL RELATIONS Maria Baldas~rri and I'ierilligi Ciocca «-r/i/ors) ROOTS OI'THE ITALIAN SCHOOL OF ECONOMICS AND FINANCE From Ferrara ( 1857) to Einaudi ( 1944) (three I'olullles) Mario Baldassarri. Massimo Di Mattco and Ro\)('rt ,\, Mundell (editors) INTERNATIONAL PROllLEMS O F ECONOMIC INTERDEJ'ENDENCE Mario B.lldas~r r i, Ce~re Imbriani and Dominick Sa ll'atore (I'<li/'''$) TilE INTE.RNATIONAL SYSTEM BETWEE.N NEW INTEGR,\Tl0N AND NEO·I'ROTECrIONISM fo, lario llaldassMri and Llica lambcrtini «('(/il(lr.l) ANTITRUST, REG ULATION AND COMPETITION Maria llaldas~rri, Alfredo Macchiati and Diego l'iacentino (l'ili/or_l) TilE I'RIVATIZ,\TION 01' PUIlLlC UTILITIES The Case of !tal)' Mario Haldassarri, Luigi Pagan('tto and Edmund S. Phelps (.'di/()r.~) EQUITY, EHICIENCY AND GROWTI! Th(' Futur(' of the W('lfar(' Stat(' Mario Baldassarri, I.uigi Pagan('tto and Edmund S. I'h('lps ( ('llit()r.~) THE 1990sSLUMI' Causes and Cur('s Ma rio Baldassarri, I.uigi I'aganetto and Edmund S. Phelps «'Ilitor.~) WORLD SAVING. PROSPERITY AND GROWTH Mario Baldassarri, Luigi l'aganetto and Edmund S. Phelps kdi/()r.~) INTERNATIONAL DII'FF.RENCES IN GROWTH R,\TF.5 tl.iarket Globali7.ation and Economic Ar('as MariO lIaldassarri and Paolo RobNti (edi/ors) FISCAL I'ROIILEMS IN THE S!NGLE·MARKET EUROPE Mario lIaldassarri and Franco Modigllanl ktlil"r~) nlE ITAUAN ECONOMY What Next? MariO Haldassarri (/'IIi/or) tl.iAFFEO PAr-HALEONI At ttle Origin of the Italian School of Economics and Financ(' MariO lIaldassarri, Luigi Paganetto and Edmund S. ['helps (t'llitor.~) IN!\wrlTUTIONS AND ECONOMIC ORGANIZATION IN THE ADVANCED ECONOMlf.5 The Governance l'erspCl:tive Gooffre)' Br('nnan (t'lIit()r) COERCiVE POWER AND ITS AllOCATION IN THE EMERGENT EUROPE Guido Coni and Roberto Cellini (fll i/()r~) Ir-HELLECTUAL PROI'ERTY, COMI'ETITION, AND GROWTH Debora Di Gioacchino, sergio Ginebri and Laura Sabani ("ilitorI) THE ROLE OF ORGANIZED INTEREST GROUPS IN POUCY MAKING Luca Lambertini «("iii/or) FIRMS' OBJF.CTIV~:S AND INTERNAL ORGANIS,\T10N IN A GLOBAL ECONOtl.1Y POSitive and Normative J\rwlysis Riccardo Looni and Giusep0' Usai (('ditor:;) ORGANIZATIONS TODAY Marco Malgarini and Gustavo l'iga ("</ i/"r.~) CM'ITAL ,\ CCUMULATION . I'RODUC1"IV1TY AND GROWn I Monitoring Italy 200S Stefano tl.lanzocchi (rdi/"r) TI1E ECONOMICS OF ENLARGEMENT Gustavo l'iga and Khi V. Thai THE ECONOM ICS OF PUBLIC PROCUREMENT Central Issues in ContcmpoTil ry Eeono m i e Theory ~nd Po l il·y Se ries St,lIlding Order ISUN 978-O-333-7 1464-S (IlI I.~ioIr Norrl! Am,.riC/l "Illy) You can rCl:eive future titles in this series as they are published by placing a standing order. Pl('as(' contact your books('ller or, in cas(' of difficulty. wril(' 10 us at the addr('S$ below with your name and addrl'ss. the title of thl' serit's and the ISBN quoted above. Customer Services D('partment. Macmillan Distribution Ltd. Iloundmil1s. Basingstoke, llamp shire RG21 6XS, f.nglJnd Firms' Objectives and Internal Organisation in a Global Economy Positive and Normative Analysis Edited by Luca Lambertini palgrave macmillan (l Servizio Italiano Pubblicazioni Internazicnal; 2009 Softcover reprint of the hardcover 1st edition 2009 978-0-230-22927-3 AU rights reserved. No reproduction, copy or transmission 01 this publication may be made without written pE'rmission. No portion 01 this publication may be reproduced, copied or transmitted save with written permission or in ac{Ordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence * permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6-10 Kirby Street, London EC1N 8lS. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their righ ts to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2009 by PAlGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company num~r 785998, of Houndmills, Basingstoke, Hampshire RG216XS. Palgrave Macmillan in the US is a division of 51 Martin's Press llC, 17S Fifth Avenue, New York, NY 10010. Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgravell> and Macmillan ~ are registered trademarks in the United States, the United Kingdom, Europe and other countries. 15BN-13: 978-{1-l3o-U927-3 hardback ISBN 978-1-349-31064-7 ISBN 978-0-230-27433-4 (eBook) ThisDOI book10.1057/9780230274334 is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin. A catalogue record for this book is available from the British Library. A catalog record for this book is available from the library of Congress. 10 9 8 7 6 5 4 3 2 , 18 17 16 15 14 13 12 11 10 09 Printed and bound in Great Bri tain by CPI Antony Rowe, Chippenham and Eastbourne Contents Preface 3 Lllea Lall/bertill; Existence and Uniqueness of Eq uilibrium in Labor-Managed COllTna! Oligopoly 9 Ko;! OkUgllc!l; - F('rCIlC 5zidamvszky Wage-R ise Contract and Couma ! Competition with Labor-Managed Firms 17 Kal il/lim Ollllislli Price Setting is Popular among Firms: WillI! Persist in Vertical Relationships with Market Uncertainty 33 Giallpa% Rossini Contagious "Social Markel Enterprises": Th e Role of Fair Traders 51 Leol/(lr(/o llecclletli - GillSCppill(l Giall(reda Should One Sell Domestic Fi rms \0 Foreign Ones? A TaJe of Delegation, Acq uisition and Collusion 85 Davide Drasolle The Make-or-Buy C hoice in a Mixed Oligopoly: A Theoretical Investigation 113 Roberto Cc/lini - Lilea Lall/bertill; Entrepreneurs' Behaviour and Performance: An Empirical Analys is on ltalian Firms 133 Filippo Oropal/o - Stef(/I/ia Rossetti Firms' International Status and Heterogeneity in Performance: Evidence from Ital y 15 1 Lorellzo Caso/Jllri - Vakria Gat/ai - G. Alfredo Millerl'(I Vertical Specialisation in Europe: Evidence from the Import Cont ent of Exports 189 ElllaImete Breda - Rila Ctlppariello - Roberla l izza Preface Luca Lambertini* University of Bologna and Un;vcrsHy of AmSlcrd .. m Whether finlls illdeed behave so as to maximize profils is a long stal/ding issue in industrial economics, as testified by several classical contributions datillg back to rhe lale '50s and '60s, well before the gallle theory revolutiol1 that has generated (he New Industrial ECOll011lics, now knoul/1 as Theory of Industrial OrgaJlization. That early debate, now alas almost forgotten, discussed the possibility {or firms to maxil1lize the growth rate, the volume of safes, or revenues, instead of profits (see Balllnol, 1958; Marris, 1953; Penrose, 1959; Williamson, 1966; and Solow, 1971). A parallel but completely independent stream of literaltlre focLlsed upon labour-managed firms (Ward, 1958; Vanek, 1977; Ireland and Lenv, 1982), or - almost eqLlivalently - workers' el1ferprises (Serte!, 1982; Aoki, 1984), whose objective is the maximization of valLIe added per worker, and/or profit sharing. Relatively later, the theory of strategic delegation has revived the il/terest for the idea that managerial firms may actually aim at maximizing a combination of profits and sales (Vickers, 1985) or profits and revenues (Fershllnan and Judd, 1987). After approximately two decades of globalization, the issLle of defining firms' objectives has come back to the fore once again, strictly entmlgled with the companion issue of outsourcing vs vertical integral ion (see McLaren, 2000; GrOSSllWll and Helpl11an, 2002, inter alia). In a l1utshell, the problem boils down to detennilling jointly the internal structure of the finll and its long- * dllca./[email protected]>, Department of Economics. 3 FIRMS' OBJECTIVES AND INTERNAL ORGANISATION IN A GLOBAL ECONOMY nm investment projects In Ilew products and technologies, in relation with the global market where specialized labour or capital inputs can be sought for outside the firm itself and even outside the country of residence of the finn. This clearly implies that globalizatioll is not just a matter of free trade.