Why Firms Make Unilateral Investments Specific to Other Firms: The Case of OEM Suppliers
AbstractThis paper examines why and under what conditions firms will make unilateral relationship-specific investments to serve their transaction partners. We propose that firms are more likely to make unilateral relationship-specific investments when the investment yields economic spillover values for other transactions with the same exchange partners as well as for third-party transactions. We also model two types of positive inter-project spillover effects that a transaction may generate: knowledge spillovers and reputation spillovers. We find empirical support for our developed theory in the context of Taiwanese suppliers of Original Equipment Manufacturers.
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Bibliographic InfoPaper provided by University of Illinois at Urbana-Champaign, College of Business in its series Working Papers with number 07-0110.
Date of creation: 2007
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Web page: http://www.business.uiuc.edu/Working_Papers/Main.asp
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