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Contractibility and Asset Ownership: On-Board Computers and Governance in U.S. Trucking

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  • George P. Baker
  • Thomas N. Hubbard
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    Abstract

    We investigate how the contractibility of actions affecting the value of an asset affects asset ownership. We examine this by testing how on-board computer (OBC) adoption affects truck ownership. We develop and test the proposition that adoption should lead to less ownership by drivers, particularly for hauls where drivers have the greatest incentive to drive in non-optimal ways or engage in rent-seeking behavior. We find evidence in favor: OBC adoption leads to less driver ownership, especially for long hauls and hauls that use specialized trailers. We also find that non-owner drivers with OBCs drive better than those without them. These results suggest that technology-enabled increases in contractibility may lead to less independent contracting and larger firms.

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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7634.

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    Date of creation: Apr 2000
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    Publication status: published as Baker, George P. and Thomas N. Hubbard. "Contractibility And Asset Ownership: On-board Computers And Governance In U.S. Trucking," Quarterly Journal of Economics, 2004, v119(4,Nov), 1443-1479.
    Handle: RePEc:nbr:nberwo:7634

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    1. Brickley, James A. & Dark, Frederick H., 1987. "The choice of organizational form The case of franchising," Journal of Financial Economics, Elsevier, vol. 18(2), pages 401-420, June.
    2. Andrea Shepard, 1993. "Contractual Form, Retail Price, and Asset Characteristics in Gasoline Retailing," RAND Journal of Economics, The RAND Corporation, vol. 24(1), pages 58-77, Spring.
    3. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-95, December.
    4. Francine Lafontaine, 1992. "Agency Theory and Franchising: Some Empirical Results," RAND Journal of Economics, The RAND Corporation, vol. 23(2), pages 263-283, Summer.
    5. 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.
    6. Jack A. Nickerson & Brian S. Silverman, 2003. "Why aren't all Truck Drivers Owner-Operators? Asset Ownership and the Employment Relation in Interstate for-hire Trucking," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(1), pages 91-118, 03.
    7. Atreya Chakraborty & Mark Kazarosian, 1999. "Product Differentiation and the Use of Information Technology: New Evidence from the Trucking Industry," NBER Working Papers 7222, National Bureau of Economic Research, Inc.
    8. Thomas N. Hubbard, 2000. "The Demand For Monitoring Technologies: The Case Of Trucking," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 533-560, May.
    9. Thomas N. Hubbard, 1999. "How Wide is the Scope of Hold-Up-Based Theories? Contractual Form and Market Thickness in Trucking," NBER Working Papers 7347, National Bureau of Economic Research, Inc.
    10. Deaton, Angus, 1985. "Panel data from time series of cross-sections," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 109-126.
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    Cited by:
    1. Robert C. Feenstra & Gordon H. Hanson, 2005. "Ownership and Control in Outsourcing to China: Estimating the Property-Rights Theory of the Firm," The Quarterly Journal of Economics, MIT Press, vol. 120(2), pages 729-761, May.
    2. Brickley, James A. & Linck, James S. & Smith, Clifford Jr., 2003. "Boundaries of the firm: evidence from the banking industry," Journal of Financial Economics, Elsevier, vol. 70(3), pages 351-383, December.
    3. Oliver Hart, 2001. "Norms and the Theory of the Firm," NBER Working Papers 8286, National Bureau of Economic Research, Inc.
    4. Thomas N. Hubbard, 2001. "Information, Decisions, and Productivity: On-Board Computers and Capacity Utilization in Trucking," NBER Working Papers 8525, National Bureau of Economic Research, Inc.
    5. Joseph Chen & Harrison Hong & Ming Huang & Jeffrey D. Kubik, 2004. "Does Fund Size Erode Mutual Fund Performance? The Role of Liquidity and Organization," American Economic Review, American Economic Association, vol. 94(5), pages 1276-1302, December.
    6. Benito Arruñada & Manuel González-Díaz & Alberto Fernández, 2004. "Determinants of organizational form: transaction costs and institutions in the European trucking industry," Industrial and Corporate Change, Oxford University Press, vol. 13(6), pages 867-882, December.
    7. George Baker & Thomas N. Hubbard, 2001. "Empirical Strategies in Contract Economics: Information and the Boundary of the Firm," American Economic Review, American Economic Association, vol. 91(2), pages 189-194, May.
    8. Acemoglu, Daron & Aghion, Philippe & Griffith, Rachel & Zilibotti, Fabrizio, 2005. "Vertical Integration and Technology: Theory and Evidence," CEPR Discussion Papers 5258, C.E.P.R. Discussion Papers.
    9. Woodruff, Christopher, 2002. "Non-contractible investments and vertical integration in the Mexican footwear industry," International Journal of Industrial Organization, Elsevier, vol. 20(8), pages 1197-1224, October.
    10. David Levinson & Reinaldo Garcia & Kathy Carlson, 2001. "A Framework for Assessing Public Private Partnerships," Working Papers 200712, University of Minnesota: Nexus Research Group.
    11. Francine Lafontaine & Scott E. Masten, 2002. "Contracting in the Absence of Specific Investments and Moral Hazard: Understanding Carrier-Driver Relations in U.S. Trucking," NBER Working Papers 8859, National Bureau of Economic Research, Inc.
    12. Pierre-André Chiappori & Bernard Salanié, 2002. "Testing Contract Theory : A Survey of Some Recent Work," Working Papers 2002-11, Centre de Recherche en Economie et Statistique.
    13. Efraim Benmelech & Mark J. Garmaise & Tobias J. Moskowitz, 2005. "Do Liquidation Values Affect Financial Contracts? Evidence from Commercial Loan Contracts and Zoning Regulation," The Quarterly Journal of Economics, MIT Press, vol. 120(3), pages 1121-1154, August.
    14. Gillen, David & Haynes, Matt, 2002. "Public and Private Benefits in Intelligent Transportation Systems/Commercial Vehicle Operations: Electronic Clearance and Supply Chain Management," Institute of Transportation Studies, Research Reports, Working Papers, Proceedings qt8qt8w8kp, Institute of Transportation Studies, UC Berkeley.

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