On Synergies and Vertical Integration
AbstractWe analyze in an incomplete contracts model whether a supplier should be integrated if in addition to his investment level he chooses the intensity of specialization towards the buyer's needs. A basic trade-off arises: While non-integration leads to higher investment incentives, potential synergies are foregone. Hence, integration can be optimal even though only the supplier makes an investment decision. This may also yield some insights for the discussion on which activities belong to a firm's core competencies. Furthermore, we show that if specialization is contractible, underspecialization will deliberately be chosen since investment incentives are thereby improved.
Download InfoTo 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 InfoPaper provided by University of Bonn, Germany in its series Discussion Paper Serie A with number 602.
Date of creation: Jul 1999
Date of revision:
Contact details of provider:
Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
Fax: +49 228 73 6884
Web page: http://www.bgse.uni-bonn.de
Synergies; Vertical Integration; Incomplete Contracts; Hold-Up; Specialization;
Other versions of this item:
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
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.:
- Grossman, Sanford J & Hart, Oliver, 1985.
"The Cost and Benefits of Ownership: A Theory of Vertical and Lateral Integration,"
CEPR Discussion Papers
70, C.E.P.R. Discussion Papers.
- Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
- Oliver Hart & Sanford Grossman, 1985. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Working papers 372, Massachusetts Institute of Technology (MIT), Department of Economics.
- Grossman, Sanford J. & Hart, Oliver D., 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Scholarly Articles 3450060, Harvard University Department of Economics.
- 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.
- 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.
- Rosenkranz, Stephanie & Schmitz, Patrick W., 1999.
"Know-how disclosure and incomplete contracts,"
12533, University Library of Munich, Germany.
- Raghuram G. Rajan & Luigi Zingales, .
"Power in a Theory of the Firm,"
CRSP working papers
335, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Maskin, Eric & Tirole, Jean, 1999. "Two Remarks on the Property-Rights Literature," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 139-49, January.
- Moore, John & Repullo, Rafael, 1988. "Subgame Perfect Implementation," Econometrica, Econometric Society, vol. 56(5), pages 1191-1220, September.
- Williams, I., 1996. "Integration and investment specificity," Discussion Paper Series In Economics And Econometrics 9614, Economics Division, School of Social Sciences, University of Southampton.
- Oliver Hart & John Moore, 1998.
"Foundations of Incomplete Contracts,"
Harvard Institute of Economic Research Working Papers
1846, Harvard - Institute of Economic Research.
- Donald B. Hausch & Yeon-Koo Che, 1999.
"Cooperative Investments and the Value of Contracting,"
American Economic Review,
American Economic Association, vol. 89(1), pages 125-147, March.
- Hart, Oliver & Moore, John, 1990.
"Property Rights and the Nature of the Firm,"
Journal of Political Economy,
University of Chicago Press, vol. 98(6), pages 1119-58, December.
- Hart, Oliver D. & Moore, John, 1990. "Property Rights and the Nature of the Firm," Scholarly Articles 3448675, Harvard University Department of Economics.
- Oliver Hart & John Moore, 1988. "Property Rights and the Nature of the Firm," Working papers 495, Massachusetts Institute of Technology (MIT), Department of Economics.
- Yang, Xiaokai & Ng, Yew-Kwang, 1995. "Theory of the firm and structure of residual rights," Journal of Economic Behavior & Organization, Elsevier, vol. 26(1), pages 107-128, January.
- Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
- Chiu, Y Stephen, 1998. "Noncooperative Bargaining, Hostages, and Optimal Asset Ownership," American Economic Review, American Economic Association, vol. 88(4), pages 882-901, September.
- Moore, John, 1992. "The firm as a collection of assets," European Economic Review, Elsevier, vol. 36(2-3), pages 493-507, April.
- Rotemberg, Julio J & Saloner, Garth, 1994. "Benefits of Narrow Business Strategies," American Economic Review, American Economic Association, vol. 84(5), pages 1330-49, December.
- Holmstrom, Bengt & Tirole, Jean, 1991. "Transfer Pricing and Organizational Form," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(2), pages 201-28, Fall.
- Maskin, Eric & Tirole, Jean, 1999. "Unforeseen Contingencies and Incomplete Contracts," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 83-114, January.
- Herbst, Patrick & Walz, Uwe, 2009. "The design of vertical R&D collaborations," CFS Working Paper Series 2009/06, Center for Financial Studies (CFS).
- Richter, Alexander, 2010. "Industrielle Produkt-Service-Systeme: Eine vertragstheoretische Analyse," Arbeitsberichte des Lehrstuhls fÃ¼r Produktionswirtschaft 9, Ruhr-Universität Bochum (RUB), Lehrstuhl für Produktionswirtschaft.
- Schmitz, Patrick W., 2005.
"Information Gathering, Transaction Costs and the Property Rights Approach,"
CEPR Discussion Papers
5417, C.E.P.R. Discussion Papers.
- Patrick W. Schmitz, 2006. "Information Gathering, Transaction Costs, and the Property Rights Approach," American Economic Review, American Economic Association, vol. 96(1), pages 422-434, March.
- Sliwka, Dirk, 2003. "Management Incentives, Signaling Effects and the Costs of Vertical Integration," IZA Discussion Papers 856, Institute for the Study of Labor (IZA).
- Alma M. dela Cruz, 2007. "Contractual Arrangements in Agriculture (Northern and Central Luzon Component)," Development Economics Working Papers 22626, East Asian Bureau of Economic Research.
- Schmitz, Patrick W., 2001.
"The Hold-Up Problem and Incomplete Contracts: A Survey of Recent Topics in Contract Theory,"
12562, University Library of Munich, Germany.
- Schmitz, Patrick W, 2001. "The Hold-up Problem and Incomplete Contracts: A Survey of Recent Topics in Contract Theory," Bulletin of Economic Research, Wiley Blackwell, vol. 53(1), pages 1-17, January.
- Patrick W. Schmitz, 2000.
"Partial Privatization and Incomplete Contracts: The Proper Scope of Government Reconsidered,"
FinanzArchiv: Public Finance Analysis,
Mohr Siebeck, Tübingen, vol. 57(4), pages 394-411, August.
- Schmitz, Patrick W., 2000. "Partial Privatization and Incomplete Contracts: The Proper Scope of Government Reconsidered," MPRA Paper 13447, University Library of Munich, Germany.
- Oberg, Christina & Holtstrom, Johan, 2006. "Are mergers and acquisitions contagious?," Journal of Business Research, Elsevier, vol. 59(12), pages 1267-1275, November.
- Mathias Erlei & Wiebke Roß, 2013. "Bounded Rationality as an Essential Ingredient of the Holdup Problem," TUC Working Papers in Economics 0009, Abteilung für Volkswirtschaftslehre, Technische Universität Clausthal (Department of Economics, Technical University Clausthal).
- Andrew F. Newman & Patrick Legros, 2011. "Incomplete Contracts and Industrial Organization: A Survey," Boston University - Department of Economics - Working Papers Series WP2011-036, Boston University - Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (BGSE Office).
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.