IDEAS home Printed from https://ideas.repec.org/a/bla/scandj/v109y2007i3p551-572.html
   My bibliography  Save this article

Asset Specificity and Vertical Integration

Author

Listed:
  • Ola Kvaløy

Abstract

Asset specificity is usually considered to be an argument for vertical integration. The main idea is that specificity induces opportunistic behavior, and that vertical integration reduces the cost of preventing opportunism. In this paper I show that asset specificity can be an argument for non‐integration. In a repeated‐game model of self‐enforcing relational contracts, it is shown that when parties are non‐integrated, increasing degrees of asset specificity make it possible to design relational contracts with higher‐powered incentives.

Suggested Citation

  • Ola Kvaløy, 2007. "Asset Specificity and Vertical Integration," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(3), pages 551-572, September.
  • Handle: RePEc:bla:scandj:v:109:y:2007:i:3:p:551-572
    DOI: 10.1111/j.1467-9442.2007.00507.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1467-9442.2007.00507.x
    Download Restriction: no

    File URL: https://libkey.io/10.1111/j.1467-9442.2007.00507.x?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
    ---><---

    References listed on IDEAS

    as
    1. Yeon-Koo Che & Jozsef Sakovics, 2004. "Contractual Remedies to the Holdup Problem: A Dynamic Perspective," Edinburgh School of Economics Discussion Paper Series 100, Edinburgh School of Economics, University of Edinburgh.
    2. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817.
    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. Leonardo A. Lanzona Jr., 2019. "Agrarian Reform and Democracy: Lessons from the Philippine Experience," Millennial Asia, , vol. 10(3), pages 272-298, December.
    2. Thiele, Veikko, 2007. "The Demand for Tailored Goods and the Theory of the Firm," MPRA Paper 2471, University Library of Munich, Germany.
    3. Benjamin Bental & Bruno Deffains & Dominique Demougin, 2012. "Credibility and Monitoring: Outsourcing as a Commitment Device," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 21(1), pages 31-52, March.
    4. James M. Malcomson, 2012. "Relational Incentive Contracts [The Handbook of Organizational Economics]," Introductory Chapters,, Princeton University Press.
    5. Maija Halonen‐Akatwijuka, 2010. "Organizational Design, Technology and the Boundaries of the Firm," Economica, London School of Economics and Political Science, vol. 77(307), pages 544-564, July.
    6. Christian A. Ruzzier, 2009. "Asset Specificity and Vertical Integration: Williamson’s Hypothesis Reconsidered," Harvard Business School Working Papers 09-119, Harvard Business School.

    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. Matthew Ellman, 2006. "Specificity Revisited: The Role of Cross-Investments," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 22(1), pages 234-257, April.
    2. Yeon-Koo Che & Jozsef Sakovics, 2006. "The Hold-up Problem," Edinburgh School of Economics Discussion Paper Series 142, Edinburgh School of Economics, University of Edinburgh.
    3. Matthew Ellman, 2006. "The optimal length of contracts with application to outsourcing," Economics Working Papers 965, Department of Economics and Business, Universitat Pompeu Fabra.
    4. Norimichi Matsueda & Jun’Ichi Miki, 2017. "Contracting-Out Of Household Waste Collection Services In Japan," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 65(02), pages 443-455, May.
    5. Persson, Torsten & Tabellini, Guido, 2002. "Political economics and public finance," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 24, pages 1549-1659, Elsevier.
    6. Stephanie Rosenkranz & Patrick W. Schmitz, 2007. "Can Coasean Bargaining Justify Pigouvian Taxation?," Economica, London School of Economics and Political Science, vol. 74(296), pages 573-585, November.
    7. Ugo Pagano, 2010. "Marrying in the Cathedral: A Framework for the Analysis of Corporate Governance," Chapters, in: Alessio M. Pacces (ed.), The Law and Economics of Corporate Governance, chapter 6, Edward Elgar Publishing.
    8. Tarek Roshdy Gebba & Mohamed Gamal Aboelmaged, 2016. "Corporate Governance of UAE Financial Institutions: A Comparative Study between Conventional and Islamic Banks," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 6(5), pages 1-7.
    9. Windsperger, Josef, 2001. "The fee structure in franchising: a property rights view," Economics Letters, Elsevier, vol. 73(2), pages 219-226, November.
    10. Kirsten Foss & Nicolai Foss, 2001. "Theoretical isolation in contract theory: suppressing margins and entrepreneurship," Journal of Economic Methodology, Taylor & Francis Journals, vol. 7(3), pages 313-339.
    11. Peter G. Klein & Michael E. Sykuta, 2010. "Editors’ Introduction," Chapters, in: Peter G. Klein & Michael E. Sykuta (ed.), The Elgar Companion to Transaction Cost Economics, chapter 1, Edward Elgar Publishing.
    12. David Martimort & Flavio Menezes & Myrna Wooders & ELISABETTA IOSSA & DAVID MARTIMORT, 2015. "The Simple Microeconomics of Public-Private Partnerships," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(1), pages 4-48, February.
    13. Hahn Robert, 2010. "Designing Smarter Regulation with Improved Benefit-Cost Analysis," Journal of Benefit-Cost Analysis, De Gruyter, vol. 1(1), pages 1-19, July.
    14. Surajeet Chakravarty & W. Bentley MacLeod, 2006. "Construction Contracts (or “How to Get the Right Building at the Right Price?”)," CESifo Working Paper Series 1714, CESifo.
    15. Dirk Sliwka, 2001. "On the Costs and Benefits of Delegation in Organizations," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 157(4), pages 568-590, December.
    16. Oliver Hart, 2013. "Noncontractible Investments and Reference Points," Games, MDPI, vol. 4(3), pages 1-20, August.
    17. Schmitz, Patrick W., 2021. "On the optimality of outsourcing when vertical integration can mitigate information asymmetries," Economics Letters, Elsevier, vol. 202(C).
    18. Foss Kirsten & Foss Nicolai & Klein Peter G. & Klein Sandra K., 2002. "Heterogeneous Capital, Entrepreneurship, and Economic Organization," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 12(1), pages 1-20, March.
    19. Nathan H. Miller, 2008. "Competition When Consumers Value Firm Scope," EAG Discussions Papers 200807, Department of Justice, Antitrust Division.
    20. Patrick W. Schmitz, 2006. "Book Review," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 162(3), pages 535-542, September.

    More about this item

    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:bla:scandj:v:109:y:2007:i:3:p:551-572. 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: Wiley Content Delivery (email available below). General contact details of provider: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442 .

    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.