Asset Specificity and Vertical Integration
Abstract
Asset specificity is usually considered to be an argument for vertical integration. The main idea is that specificity induces opportunistic behavior, and that vertical integration reduces the cost of preventing opportunism. In this paper I show that asset specificity can be an argument for non-integration. In a repeated-game model of self-enforcing relational contracts, it is shown that when parties are non-integrated, increasing degrees of asset specificity make it possible to design relational contracts with higher-powered incentives. Copyright The editors of the "Scandinavian Journal of Economics" 2007 .Download Info
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Bibliographic Info
Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.
Volume (Year): 109 (2007)
Issue (Month): 3 (09)
Pages: 551-572
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Web page: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Benjamin Bental & Bruno Deffains & Dominique Demougin, 2012. "Credibility and Monitoring: Outsourcing as a Commitment Device," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 21(1), pages 31-52, 03.
- James Malcomson, 2010. "Relational Incentive Contracts," Economics Series Working Papers 508, University of Oxford, Department of Economics.
- Thiele, Veikko, 2007. "The Demand for Tailored Goods and the Theory of the Firm," MPRA Paper 2471, University Library of Munich, Germany.
- Maija Halonen-Akatwijuka, 2010.
"Organizational Design, Technology and the Boundaries of the Firm,"
Economica,
London School of Economics and Political Science, vol. 77(307), pages 544-564, 07.
- Maija Halonen, 2002. "Organizational Design, Technology and the Boundaries of the Firm," Bristol Economics Discussion Papers 02/540, Department of Economics, University of Bristol, UK.
- Christian A. Ruzzier, 2009. "Asset Specificity and Vertical Integration: Williamson’s Hypothesis Reconsidered," Harvard Business School Working Papers 09-119, Harvard Business School.
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