The Vertical Organization of Industry: Systems Competition versus Component Competition
AbstractWe discuss two contrasting styles of vertical organization of complementary activities or components in an industry: systems competition versus component competition. When firms' competencies differ, systems competition is not a perfect substitute for component competition, even with Bertmnd behavior. Costs, prices, industry profits, and the distribution of those profits among firms all differ between the two styles of organization. Moreover, firms' profit incentives do not generally guide them towards the socially efficient form of vertical organization. In duopoly, there is a bias towards open organization (component competition), but with enough firms (three or more, in an exponential example) this bias is reversed. Copyright (c) 1998 Massachusetts Institute of Technology.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.
Volume (Year): 7 (1998)
Issue (Month): 2 (06)
Contact details of provider:
Web page: http://www.kellogg.northwestern.edu/research/journals/JEMS/
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Nicolai J Foss & Thorbjørn Knudsen, .
"The Ressource-Based Tangle: Towards a Sustainable Explanation of Competitive Advantage,"
IVS/CBS Working Papers
00-1, Department of Industrial Economics and Strategy, Copenhagen Business School.
- Nicolai J. Foss & Thorbj�rn Knudsen, 2003. "The resource-based tangle: towards a sustainable explanation of competitive advantage," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 24(4), pages 291-307.
- Mark Shanley & Margaret Peteraf, 2004. "Vertical group formation: A social process perspective," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 25(6-7), pages 473-488.
- Fine, Charles H. & Whitney, Daniel E., 1996. "Is the make-buy decision process a core competence?," Working papers #140-96. Working paper (S, Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Christoph Schlueter-Langdon, 2000. "Information Technology And The Vertical Organization Of Industry," Computing in Economics and Finance 2000 174, Society for Computational Economics.
- Oz Shy, 2011.
"A Short Survey of Network Economics,"
Review of Industrial Organization,
Springer, vol. 38(2), pages 119-149, March.
- Kim, Jeong-Yoo, 2002. "Product compatibility as a signal of quality in a market with network externalities," International Journal of Industrial Organization, Elsevier, vol. 20(7), pages 949-964, September.
- Steven Globerman & Aidan Vining, 2004. "The Outsourcing Decision: A Strategic Framework," International Trade 0404007, EconWPA.
- Liao, Chun-Hsiung & Tauman, Yair, 2002. "The role of bundling in price competition," International Journal of Industrial Organization, Elsevier, vol. 20(3), pages 365-389, March.
- Burgelman, Robert A. & Grove, Andrew S., 2007. "Let Chaos Reign, Then Rein In Chaos--Repeatedly: Managing Strategic Dynamics For Corporate Longevity," Research Papers 1954, Stanford University, Graduate School of Business.
- Bonaccorsi, Andrea & Giuri, Paola, 2001.
"The long-term evolution of vertically-related industries,"
International Journal of Industrial Organization,
Elsevier, vol. 19(7), pages 1053-1083, July.
- Andrea Bonaccorsi & Paola Giuri, 2000. "The long term evolution of vertically-related industries," LEM Papers Series 2000/01, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
- Klimenko, Mikhail M., 2004. "Competition, matching, and geographical clustering at early stages of the industry life cycle," Journal of Economics and Business, Elsevier, vol. 56(3), pages 177-195.
- Manfredi M.A. La Manna , 2006. "The Hidden Surplus From Research Joint Ventures: An Application Of Systems Reliability Theory," CRIEFF Discussion Papers 0610, Centre for Research into Industry, Enterprise, Finance and the Firm.
- Leiponen, Aija, 2006. "Competing through cooperation: Standard setting in wireless telecommunications," Discussion Papers 1056, The Research Institute of the Finnish Economy.
- Burgelman, Robert A., 2002. "Strategy as Vector and the Inertia of Co-evolutionary Lock-in," Research Papers 1745, Stanford University, Graduate School of Business.
- Sieber, Sandra & Valor, Josep, 2002. "Market bundling strategies in the horizontal portal industry," IESE Research Papers D/480, IESE Business School.
- Ashish Arora & Farasat Bokhari, 1996. "Returns to Specialization, Transaction Costs, and the Dynamics of Industry Evolution," Industrial Organization 9606002, EconWPA, revised 01 Jul 1996.
- Acciaro, M. & Haralambides, H., 2008. "Product bundling in global ocean transportation," Econometric Institute Research Papers EI 2008-18, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.