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Affiliation, Integration, and Information: Ownership Incentives and Industry Structure

  • Thomas N. Hubbard
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    This paper presents theory and evidence on horizontal industry structure, focusing on situations where plant-level scale economies are small and market power is not an issue. At issue is the question: what makes industries necessarily fragmented? The theoretical model distinguishes between the structure of brands and firms in an industry by examining trade-offs associated with affiliation and integration, and how they are affected by the contracting environment. I show how contractual incompleteness can lead industries to be necessarily fragmented. I also show that improvements in the contracting environment will tend to lead to a greater concentration of brands, but whether they lead industries to be more or less concentrated depends on what becomes contractible. I then discuss the propositions generated by the model through a series of case study examples.

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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8300.

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    Date of creation: May 2001
    Date of revision:
    Publication status: published as Hubbard, Thomas. "Affiliation, Integration, and Information: Ownership Incentives and Industry Structure." Journal of Industrial Economics (June 2004): 201-228.
    Handle: RePEc:nbr:nberwo:8300
    Note: IO
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