Intra-product Specialization, Technological Dependency and Organization Structure of Heterogeneous Firms

Abstract

This document integrates GHM model and Nash-bargain game into dynamic game of north-south framework with heterogeneous firms, and uses backward deduction method to resolve the equilibrium organization structure of heterogeneous firms. This document argues that the degree of technological dependency of final-good producers on the intermediate suppliers is the key to the optimal organization structure of heterogeneous final-good produces. It concludes that when final-good producers in head-quarter intensive industry, get intermediate input from home country, and when final-good producers in component intensive industry get intermediate input from foreign the degree of technological dependency of final-good producer on intermediate supplier is very important for his organization structure.