Munich Personal RePEc Archive

Coordination Costs, Market Size, and the Choice of Technology

Zhou, Haiwen (2017): Coordination Costs, Market Size, and the Choice of Technology.

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Abstract

Impact of coordination costs and market size on a firm’s choice of technology is studied in a general equilibrium model in which firms engage in oligopolistic competition. A firm establishes an organizational hierarchy to coordinate its production. First, it is shown that an increase in market size leads a firm to choose a more specialized technology. Second, surprisingly, a robust result is that an increase in the level of coordination efficiency leads a firm to choose a less specialized technology.

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