The effect of recessions on firms’ boundaries

Type/nr A04/13
Skrevet av Eirik Sjåholm Knudsen and Kirsten Foss

The economic theory of the firm offers conflicting predictions of how the two major effects of recessions, changes in demand and access to credit, affect firm boundaries. Using data on Norwegian firms in the recent recession, we find support for both increased and reduced vertical integration of core activities in response to such changes. Further, we find that access to credit negatively moderates the effect of reductions in demand on vertical integration. The latter finding may highlight a possible explanation for the conflicting theoretical predictions.


Språk Skrevet på engelsk