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Make Versus Buy in Trucking: Asset Ownership, Job Design, and Information

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  • George P. Baker
  • Thomas N. Hubbard

Abstract

Explaining patterns of asset ownership is a central goal of both organizational economics and industrial organization. We develop a model of asset ownership in trucking, which we test by examining how the adoption of different classes of on-board computers (OBCs) between 1987 and 1997 influenced whether shippers use their own trucks for hauls or contract with for-hire carriers. We find that OBCs' incentive-improving features pushed hauls toward private carriage, but their resource-allocation-improving features pushed them toward for-hire carriage. We conclude that ownership patterns in trucking reflect the importance of both incomplete contracts and of job design and measurement issues.

Suggested Citation

  • 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.
    • Handle: RePEc:aea:aecrev:v:93:y:2003:i:3:p:551-572
    DOI: 10.1257/000282803322156981
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    References listed on IDEAS

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    1. Baker, George P, 1992. "Incentive Contracts and Performance Measurement," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 598-614, June.
    2. George P. Baker & Thomas N. Hubbard, 2000. "Contractibility and Asset Ownership: On-Board Computers and Governance in U.S. Trucking," NBER Working Papers 7634, National Bureau of Economic Research, Inc.
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