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Avoiding Holdup: Asset Specificity and Technical Change in the Cuban Sugar Industry, 1899–1929

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  • Dye, Alan

Abstract

Asset specificity can have profound influences on the economic structure of a country. An example is post-colonial Cuba. This article demonstrates that the existence of site specificity in assets generated problems of holdup for sugar mill owners in their contractual relations with cane suppliers. Recognition of that incentive structure offers an institutional explanation for the post-1900 concentration of U.S. investment in the eastern provinces. To reduce transaction costs, mill managers avoided investing in the western part of the island where the sugar industry was well established. A consequence was the relative decline of the western region.

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  • Dye, Alan, 1994. "Avoiding Holdup: Asset Specificity and Technical Change in the Cuban Sugar Industry, 1899–1929," The Journal of Economic History, Cambridge University Press, vol. 54(3), pages 628-653, September.
    • Handle: RePEc:cup:jechis:v:54:y:1994:i:03:p:628-653_01
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    Cited by:

    1. Anjana Susarla, 2012. "Contractual Flexibility, Rent Seeking, and Renegotiation Design: An Empirical Analysis of Information Technology Outsourcing Contracts," Management Science, INFORMS, vol. 58(7), pages 1388-1407, July.
    2. Ricardo Hausmann & Rodrigo Wagner, 2009. "Certification Strategies, Industrial Development and a Global Market for Biofuels," CID Working Papers 192, Center for International Development at Harvard University.
    3. Herath, Deepananda & Weersink, Alfons, 2009. "From Plantations to Smallholder Production: The Role of Policy in the Reorganization of the Sri Lankan Tea Sector," World Development, Elsevier, vol. 37(11), pages 1759-1772, November.

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