Advanced Search
MyIDEAS: Login to save this book chapter or follow this series

Determinants of firm boundaries: Empirical analysis of the Japanese auto industry from 1984 to 2002

In: Organizational Innovation and Firm Performance

Contents:

Author Info

  • Sadao Nagaoka
  • Akira Takeishi
  • Yoshihisa No

Abstract

Using the framework of contract economics, we assess the determinants of the choice of vertical integration, relational contracting (keiretsu sourcing) or market sourcing by seven Japanese automobile manufacturers (OEMs) with respect to 54 components. Our major findings are as follows. First, the specificity of a component significantly promotes keiretsu over market sourcing. This effect declines with the testability of the component, consistent with transaction cost economics. Second, the interdependency of a component makes vertical integration significantly preferred to keiretsu sourcing, while the specificity of the component does not. These results suggest that the hold-up risk due to specific investment can often be effectively controlled by relational contracting based on keiretsu sourcing, while accommodating non-contractible design changes may often require vertical integration. Third, high testability of a component significantly promotes the choice of keiretsu over market sourcing. One interpretation of this result is that a keiretsu supplier may have both the incentive to gather information for quality improvement in an environment of high testability, and the incentive to share the information with the OEM for its implementation. J. Japanese Int. Economies 22 (2) (2008) 187-206.

(This abstract was borrowed from another version of this item.)

Download Info

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Bibliographic Info

as in new window

This chapter was published in:

  • George Baker & Takeo Hoshi & Hideshi Itoh & Sadao Nagaoka, 2008. "Organizational Innovation and Firm Performance," NBER Books, National Bureau of Economic Research, Inc, number bake08-1, October.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 12173.

    Handle: RePEc:nbr:nberch:12173

    Contact details of provider:
    Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
    Phone: 617-868-3900
    Email:
    Web page: http://www.nber.org
    More information through EDIRC

    Related research

    Keywords:

    Other versions of this item:

    Find related papers by JEL classification:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Barzel, Yoram, 1982. "Measurement Cost and the Organization of Markets," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 27-48, April.
    2. Wernerfelt, Birger, 1997. "On the Nature and Scope of the Firm: An Adjustment-Cost Theory," The Journal of Business, University of Chicago Press, vol. 70(4), pages 489-514, October.
    3. Aghion, Philippe & Tirole, Jean, 1994. "The Management of Innovation," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 1185-1209, November.
    4. George Baker & Robert Gibbons & Kevin J. Murphy, 2002. "Relational Contracts And The Theory Of The Firm," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 39-84, February.
    5. Masten, Scott E, 1984. "The Organization of Production: Evidence from the Aerospace Industry," Journal of Law and Economics, University of Chicago Press, vol. 27(2), pages 403-17, October.
    6. Patrick Bajari & Steven Tadelis, 1999. "Incentives versus Transaction Costs: A Theory of Procurement Contracts," Working Papers 99029, Stanford University, Department of Economics.
    7. Steven Tadelis, 2002. "Complexity, Flexibility, and the Make-or-Buy Decision," American Economic Review, American Economic Association, vol. 92(2), pages 433-437, May.
    8. Aghion, P. & Tirole, J., 1993. "On the Management of Innovation," Working papers 93-12, Massachusetts Institute of Technology (MIT), Department of Economics.
    9. Kirk Monteverde & David J. Teece, 1982. "Supplier Switching Costs and Vertical Integration in the Automobile Industry," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 206-213, Spring.
    10. George P. Baker & Thomas N. Hubbard, 2003. "Make Versus Buy in Trucking: Asset Ownership, Job Design, and Information," American Economic Review, American Economic Association, vol. 93(3), pages 551-572, June.
    11. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    12. Slade, Margaret E, 1996. "Multitask Agency and Contract Choice: An Empirical Exploration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 465-86, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:nbr:nberch:12173. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

    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.