Vertical integration and transaction-specific sunk costs

Knieps, Günter

doi:10.1016/0014-2921(82)90006-x

Cited by 30 publications

(14 citation statements)

References 9 publications

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“…Longterm relational contracts (Masten & Crocker, 1985;Mulherin, 1986;Wiggins & Libecap, 1985), impartition policies (Barreyre, 1988), tapered and quasi-integration (Porter, 1980), joint ventures (Harrigan, 1988), franchising (John, 1984;Norton, 1988;Rubin, 1978), networks (Jarillo, 1988: Thorelli, 1986), quasi-firms (Eccles, 1981), hybrids (Borys & Jemison, 1989), and "vertical financial ownership" (Flaherty, 1981) are some of the "institutions of capitalism" (Williamson, 1985) which emerged in response to the inadequacies of "classical market contracting" (Macneil, 1980). The generalizable thesis of the transaction cost literature is that the particular institution (governance structure) chosen to implement the strategy of vertical integration mainly serves efficiency purposes (Bork, 1978;Williamson, 1985 (Simon, 1978 Contractual problems become acute when there are small numbers bargaining, a situation that occurs when transactions involve human, physical or site "asset specificity" (Spiller, 1985;Williamson, 1979 (Joskow, 1985a Goldberg & Erickson, 1987;Hennart 1988b;Klein, 1988;Palay, 1984;Teece, 1976), formal modeling (Kleindorfer & Knieps, 1982;Masten, 1982;Riordan & Williamson, 1985) and statistical testing (Anderson & Schmittlein, 1984;Armour & Teece, 1980;Caves & Bradburd, 1988;Heide & John, 1988;…”

Section: The Advantages Of Vertical Integration Strategymentioning

confidence: 99%

The choice of organizational form: Vertical financial ownership versus other methods of vertical integration

Mahoney

1992

Strategic Management Journal

360

253

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Section: The Advantages Of Vertical Integration Strategymentioning

confidence: 99%

The choice of organizational form: Vertical financial ownership versus other methods of vertical integration

Mahoney

1992

Strategic Management Journal

360

253

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“…The importance of relationship-specific assets in explaining and predicting vertical integration is supported by a large body of research literature including statistical testing (the primary focus of the current article) as well as formal modeling (e.g., Gibbons, 2005;Kleindorfer & Knieps, 1982;Riordan & Williamson, 1985) and case studies.…”

Section: Theoretical Framework For Vertical Integration and Contractimentioning

confidence: 99%

Testing Organizational Economics Theories of Vertical Integration

Lajili¹,

Madunic²,

Mahoney³

Research Methodology in Strategy and Management

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This article classifies empirical research on vertical integration under four approaches -value-added-to-sales, qualitative-quantitative, input-output, and microanalytic. The emphasis here is on the microanalytic approach which has accumulated the most systematic evidence to support its theoretical propositions. In particular, this article emphasizes theoretical and empirical contributions from organizational economics (especially transaction costs and agency theories) for both vertical integration and (vertical) contracting. Limitations and methodological challenges concerning the empirical testing of theories of vertical integration are addressed and suggestions for further research are provided.

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“…Under the assumption of complete information a well-specified contract can be designed between all parties involved creating incentives for ex ante irreversible investments and no ex post cheating incentives (e.g. Kleindorfer, Knieps, 1982). As Williamson (1983, p. 526) has shown, a security bond equal in amount to the irreversible investment would serve the purpose of a perfect hostage.…”

Section: No Access Holidaysmentioning

confidence: 99%

Telecommunications Markets in the Stranglehold of EU Regulation: On the Need for a Disaggregated Regulatory Contract

Knieps¹

2005

Competition and Regulation in Network Industries

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Abstract:The increasing complexity of EU regulation is resulting in a tangle of contradictory decisions and statements, involving also new markets, such as interactive cable television, Internet etc. Whereas in the past sector-specific regulation has been applied in a discretionary manner in order to correct the rules of the market game, the really challenging task for the future seems to be the development and implementation of statutory constraints for the regulatory authorities in order to guarantee a predictable regulation of market power. For this purpose the design and implementation of a disaggregated regulatory contract on the statutory level (EU Directives and national law) is derived, which should be an essential principle in the EU Review 2006. Its basic components consist of limiting regulation to monopolistic bottlenecks, exploiting the phasing-out potentials, and a disaggregated application of regulatory instruments. In contrast, the problem of opportunistic regulatory behaviour with respect to irreversible investments can be solved by the application of the already existing statutory constraint of the Framework Directive guaranteeing financial viability.

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Vertical integration and transaction-specific sunk costs

Cited by 30 publications

References 9 publications

The choice of organizational form: Vertical financial ownership versus other methods of vertical integration

The choice of organizational form: Vertical financial ownership versus other methods of vertical integration

Testing Organizational Economics Theories of Vertical Integration

Telecommunications Markets in the Stranglehold of EU Regulation: On the Need for a Disaggregated Regulatory Contract

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