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Organizational structure and technological investment revisited: An explanation based on the property rights approach

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  • Hamada, Kojun

Abstract

Using the property rights approach, I investigate how two vertical chains consisting of an upstream and downstream firm choose to integrate when competing in a duopoly market. This shows that whether a vertical chain chooses to integrate depends on the relative sizes of two strategic effects on quantity and investment. If the negative effect of decreasing investments is larger (smaller) than the positive effect of alleviating an intense quantity competition, vertical separation (integration) is chosen. I illustrate that vertical separation or integration appears in equilibrium depending on the degrees of market competitiveness and investment effectiveness.

Suggested Citation

  • Hamada, Kojun, 2023. "Organizational structure and technological investment revisited: An explanation based on the property rights approach," Research in Economics, Elsevier, vol. 77(3), pages 390-401.
    • Handle: RePEc:eee:reecon:v:77:y:2023:i:3:p:390-401
    DOI: 10.1016/j.rie.2023.06.006
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    References listed on IDEAS

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    1. 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 1119-1158, December.
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    More about this item

    Keywords

    Vertical integration; Vertical separation; Property rights approach; Duopoly; Cost-reducing investment;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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