IDEAS home Printed from https://ideas.repec.org/a/kap/sbusec/v29y2007i1p119-135.html

Do Investments in Specialized Knowledge Lead to Composite Good Industries?

Author

Listed:
  • Antoine Soubeyran
  • Hubert Stahn

Abstract

We try to understand why firms producing goods by means of complementary components do not merge, especially in industries in which investments in component-based knowledge matters. As Audretsch, we state that these activities are developed by “individuals” who do their best to appropriate the return from their knowledge and whose effort is non-contractible. The organization of the industry into firms is identified to a partition of the set of individuals. In this context, we prove that an organization in which each individual hold his own firms is both stable with respect to unilateral deviation and optimal in the line of the property right approach. If the returns are high enough, this structure is even the only one which shares both properties. Copyright Springer 2007

Suggested Citation

  • Antoine Soubeyran & Hubert Stahn, 2007. "Do Investments in Specialized Knowledge Lead to Composite Good Industries?," Small Business Economics, Springer, vol. 29(1), pages 119-135, June.
    • Handle: RePEc:kap:sbusec:v:29:y:2007:i:1:p:119-135
    DOI: 10.1007/s11187-006-0008-9
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11187-006-0008-9
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11187-006-0008-9?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or

    for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Raghuram G. Rajan & Luigi Zingales, 1998. "Power in a Theory of the Firm," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(2), pages 387-432.
    2. 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.
    3. Hugo Sonnenschein, 1968. "The Dual of Duopoly Is Complementary Monopoly: or, Two of Cournot's Theories Are One," Journal of Political Economy, University of Chicago Press, vol. 76(2), pages 316-316.
    4. Chae, Suchan & Heidhues, Paul, 2004. "A group bargaining solution," Mathematical Social Sciences, Elsevier, vol. 48(1), pages 37-53, July.
    5. Dutta, Bhaskar & Mutuswami, Suresh, 1997. "Stable Networks," Journal of Economic Theory, Elsevier, vol. 76(2), pages 322-344, October.
      • Dutta, Bhaskar & Mutuswami, Suresh, 1996. "Stable Networks," Working Papers 971, California Institute of Technology, Division of the Humanities and Social Sciences.
    6. Economides, Nicholas & Salop, Steven C, 1992. "Competition and Integration among Complements, and Network Market Structure," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 105-123, March.
    7. Colombo, Massimo G & Rossini, Andrea, 1997. "Ownership Structures in Network Industries When the Rationality of Regulators Is Bounded," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 6(4), pages 783-806, December.
    8. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817.
    9. Bernheim, B. Douglas & Peleg, Bezalel & Whinston, Michael D., 1987. "Coalition-Proof Nash Equilibria I. Concepts," Journal of Economic Theory, Elsevier, vol. 42(1), pages 1-12, June.
    10. Stole, Lars A & Zwiebel, Jeffrey, 1996. "Organizational Design and Technology Choice under Intrafirm Bargaining," American Economic Review, American Economic Association, vol. 86(1), pages 195-222, March.
    11. Ray, Debraj & Vohra, Rajiv, 1997. "Equilibrium Binding Agreements," Journal of Economic Theory, Elsevier, vol. 73(1), pages 30-78, March.
    12. Eric Maskin & Jean Tirole, 1999. "Two Remarks on the Property-Rights Literature," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(1), pages 139-149.
    13. Jackson, Matthew O. & Wolinsky, Asher, 1996. "A Strategic Model of Social and Economic Networks," Journal of Economic Theory, Elsevier, vol. 71(1), pages 44-74, October.
    14. Economides, Nicholas, 1999. "Quality choice and vertical integration," International Journal of Industrial Organization, Elsevier, vol. 17(6), pages 903-914, August.
    15. Bernheim, B. Douglas & Whinston, Michael D., 1987. "Coalition-Proof Nash Equilibria II. Applications," Journal of Economic Theory, Elsevier, vol. 42(1), pages 13-29, June.
    16. Gary S. Becker & Kevin M. Murphy, 1994. "The Division of Labor, Coordination Costs, and Knowledge," NBER Chapters, in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education, Third Edition, pages 299-322, National Bureau of Economic Research, Inc.
    17. David B. Audretsch, 1995. "Innovation and Industry Evolution," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011468, December.
    18. Gary S. Becker & Kevin M. Murphy, 1994. "The Division of Labor, Coordination Costs, and Knowledge," NBER Chapters, in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education, Third Edition, pages 299-322, National Bureau of Economic Research, Inc.
    19. Oliver Hart & John Moore, 1999. "Foundations of Incomplete Contracts," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(1), pages 115-138.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Erik E. Lehmann & Manuel T. Schwerdtfeger, 2016. "Evaluation of IPO-firm takeovers: an event study," Small Business Economics, Springer, vol. 47(4), pages 921-938, December.
    2. Erik Lehmann & Thorsten Braun & Sebastian Krispin, 2012. "Entrepreneurial human capital, complementary assets, and takeover probability," The Journal of Technology Transfer, Springer, vol. 37(5), pages 589-608, October.
    3. Braun, Thorsten V. & Lehmann, Erik E. & Schwerdtfeger, Manuel T., 2011. "The stock market evaluation of IPO-firm takeovers," UO Working Papers 01-11, University of Augsburg, Chair of Management and Organization.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cheng, Wenli & Yang, Xiaokai, 2004. "Inframarginal analysis of division of labor: A survey," Journal of Economic Behavior & Organization, Elsevier, vol. 55(2), pages 137-174, October.
    2. Gersbach, Hans & Haller, Hans, 2020. "On efficient firm formation," Mathematical Social Sciences, Elsevier, vol. 107(C), pages 1-12.
    3. José María Liberti & Mitchell A. Petersen, 2018. "Information: Hard and Soft," NBER Working Papers 25075, National Bureau of Economic Research, Inc.
    4. Krishna B. Kumar & Raghuram G. Rajan & Luigi Zingales, "undated". "What Determines Firm Size?," CRSP working papers 496, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
    5. Schmitz, Patrick W, 2001. "The Hold-up Problem and Incomplete Contracts: A Survey of Recent Topics in Contract Theory," Bulletin of Economic Research, Wiley Blackwell, vol. 53(1), pages 1-17, January.
    6. Patrick W. Schmitz, 2006. "Information Gathering, Transaction Costs, and the Property Rights Approach," American Economic Review, American Economic Association, vol. 96(1), pages 422-434, March.
    7. Bester, Helmut, 2002. "Externalities and the Allocation of Decision Rights in the Theory of the Firm," CEPR Discussion Papers 3276, C.E.P.R. Discussion Papers.
    8. Patrick W. Schmitz, 2001. "Partial Privatization and Incomplete Contracts: The Proper Scope of Government Reconsidered," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 57(4), pages 394-411, August.
    9. Paul Walker, 2010. "The (Non)Theory Of The Knowledge Firm," Scottish Journal of Political Economy, Scottish Economic Society, vol. 57(1), pages 1-32, February.
    10. Sandeep Baliga & Tomas Sjöström, 2009. "Contracting with Third Parties," American Economic Journal: Microeconomics, American Economic Association, vol. 1(1), pages 75-100, February.
    11. Chatterjee Kalyan & Chiu Y. Stephen, 2007. "When Does Competition Lead to Efficient Investments?," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 7(1), pages 1-39, July.
    12. Hendrik Hakenes & Svetlana Katolnik, 2018. "Optimal Team Size and Overconfidence," Group Decision and Negotiation, Springer, vol. 27(4), pages 665-687, August.
    13. Tomas Mantecon & Kyojik Song & Haowen Luo, 2016. "The Control and Performance of Joint Ventures," Financial Management, Financial Management Association International, vol. 45(2), pages 431-465, May.
    14. Guangzhen Sun & Xiaokai Yang & Shuntian Yao, 1999. "Theoretical Foundation of Economic Development Based on Networking Decisions in the Competitive Market," CID Working Papers 16A, Center for International Development at Harvard University.
    15. Vartiainen, Hannu, 2011. "Dynamic coalitional equilibrium," Journal of Economic Theory, Elsevier, vol. 146(2), pages 672-698, March.
    16. Nobel Prize Committee, 2016. "Oliver Hart and Bengt Holmström: Contract Theory," Nobel Prize in Economics documents 2016-1, Nobel Prize Committee.
    17. Schmitz, Patrick W., 2015. "Government versus private ownership of public goods: The role of bargaining frictions," Journal of Public Economics, Elsevier, vol. 132(C), pages 23-31.
    18. Konishi, Hideo & Ray, Debraj, 2003. "Coalition formation as a dynamic process," Journal of Economic Theory, Elsevier, vol. 110(1), pages 1-41, May.
    19. Hennessy, David A., 2003. "Property rights, productivity, and the nature of noncontractible actions in a franchise system," Journal of Economic Behavior & Organization, Elsevier, vol. 52(4), pages 443-468, December.
    20. Schmitz, Patrick W. & Sliwka, Dirk, 2001. "On synergies and vertical integration," International Journal of Industrial Organization, Elsevier, vol. 19(8), pages 1281-1295, September.

    More about this item

    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
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:sbusec:v:29:y:2007:i:1:p:119-135. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.