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Transaction costs, industry experience and make-or-buy decisions in the population of early U.S. auto firms

  • Bigelow, Lyda S.
  • Argyres, Nicholas
Registered author(s):

    We study the determinants of make-or-buy decisions for engines made by every recorded U.S. auto firm during 1917-1933. Most make-or-buy studies testing predictions of transaction cost economics exclude smaller firms, even though their make-or-buy behavior might be different from large firms' due to capital constraints or other factors. We find that transaction cost effects on make-or-buy choices were nevertheless important at the population level. We also find that firm experience in the industry, as well as pre-entry experience, significantly affected make-buy choices. These experience effects may reflect the interaction of mechanisms emphasized in evolutionary and transaction cost theories.

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    Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

    Volume (Year): 66 (2008)
    Issue (Month): 3-4 (June)
    Pages: 791-807

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    Handle: RePEc:eee:jeborg:v:66:y:2008:i:3-4:p:791-807
    Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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