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Strategy and Transaction Costs: The Organization of Distribution in the Carbonated Soft Drink Industry

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  • Muris, Timothy J
  • Scheffman, David T
  • Spiller, Pablo T

Abstract

This paper analyzes the ongoing transformation of the soft drink distribution of Coca-Cola and Pepsi-Cola from systems of independent bottlers to captive bottling subsidiaries. A transaction cost-based theory is developed.to explain this restructuring. It is postulated that changes in the external environment and the resulting changes in the strategies of Coca-Cola and Pepsi-Cola raised the costs of transacting between them and their independent bottlers. Two types of empirical tests are presented. One exploits the difference in the distribution of Coca-Cola and Pepsi-Cola in the fountain channel. The other consists of statistical analyses of the competitive effects of the move toward captive distribution. Both types of tests support the basic hypotheses. Copyright 1992 by MIT Press.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.

Volume (Year): 1 (1992)
Issue (Month): 1 (Spring)
Pages: 83-128

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Handle: RePEc:bla:jemstr:v:1:y:1992:i:1:p:83-128

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Web page: http://www.kellogg.northwestern.edu/research/journals/JEMS/

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Web: http://www.blackwellpublishing.com/journal.asp?ref=1058-6407&site=1

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Cited by:
  1. Francine Lafontaine & Kathryn L. Shaw, 2001. "Targeting Managerial Control: Evidence from Franchising," NBER Working Papers 8416, National Bureau of Economic Research, Inc.
  2. Klein, Benjamin, 1995. "The economics of franchise contracts," Journal of Corporate Finance, Elsevier, vol. 2(1-2), pages 9-37, October.
  3. Enghin Atalay & Ali Horta?su & Chad Syverson, 2014. "Vertical Integration and Input Flows," American Economic Review, American Economic Association, vol. 104(4), pages 1120-48, April.
  4. Abiru, Masahiro & Nahata, Babu & Raychaudhuri, Subhashis & Waterson, Michael, 1998. "Equilibrium structures in vertical oligopoly," Journal of Economic Behavior & Organization, Elsevier, vol. 37(4), pages 463-480, December.
  5. Nickerson, Jack A. & Vanden Bergh, Richard, 1999. "Economizing in a context of strategizing: governance mode choice in Cournot competition," Journal of Economic Behavior & Organization, Elsevier, vol. 40(1), pages 1-15, September.
  6. Francine Lafontaine & Margaret Slade, 2007. "Vertical Integration and Firm Boundaries: The Evidence," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 629-685, September.
  7. Steven Globerman & Aidan Vining, 2004. "The Outsourcing Decision: A Strategic Framework," International Trade 0404007, EconWPA.
  8. Frank Mathewson & Ignatius J. Horstmann, 2004. "Coordination, Specialization and Incentives: An Equilibrium Model of Firm Boundaries," Econometric Society 2004 North American Winter Meetings 266, Econometric Society.
  9. Catherine Matraves, 1999. "Market Integration and Market Structure in the European Soft Drinks Industry: Always Coca-Cola?," CIG Working Papers FS IV 99-13, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  10. Catherine Matraves, 2002. "European Integration and Market Structure in the Soft Drinks Industry," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 9(3), pages 295-310.
  11. Michael, Steven C., 2007. "Transaction cost entrepreneurship," Journal of Business Venturing, Elsevier, vol. 22(3), pages 412-426, May.
  12. Josef Windsperger, 2002. "The Structure of Ownership Rights in Franchising: An Incomplete Contracting View," European Journal of Law and Economics, Springer, vol. 13(2), pages 129-142, March.
  13. Traversac, Jean-Baptiste & Rousset, Sylvain & Perrier-Cornet, Philippe, 2011. "Farm resources, transaction costs and forward integration in agriculture: Evidence from French wine producers," Food Policy, Elsevier, vol. 36(6), pages 839-847.
  14. Davide Vannoni, 1999. "Empirical Studies of Vertical Integration: the Transaction Cost Orthodoxy," CERIS Working Paper 199903, Institute for Economic Research on Firms and Growth - Moncalieri (TO).
  15. Josef Windsperger, 2003. "Complementarities and Substitutabilities in Franchise Contracting: Some Results from the German Franchise Sector," Journal of Management and Governance, Springer, vol. 7(3), pages 291-313, September.

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