We extend research on transaction cost theory that shows that vertical integration enables firms to protect their investments in exchange relationships better than market mechanisms. However, extant research finds ownership to exacerbate, rather than limit, exchange partner opportunism. Hence, the purpose of this study is to investigate conditions under which ownership can be effective for constraining an exchange partner's opportunism. Using matched dyadic data for 296 hotel brands, we conduct multilevel hierarchical linear modeling and identify conditions under which common ownership limits hotel opportunism. Findings indicate that ownership can limit hotel opportunism when brand headquarters can easily monitor the hotel's activities.We gratefully acknowledge support for this study from the two hotel companies studied as well as the summer research program of the Cornell University School of Hotel Administration. The able assistance of Reed Fisher in helping us with the data collection is much appreciated. We also thank George Franke for his tutelage on SAS programming.
AbstractWe extend research on transaction cost theory that shows that vertical integration enables firms to protect their investments in exchange relationships better than market mechanisms. However, extant research finds ownership to exacerbate, rather than limit, exchange partner opportunism.Hence, the purpose of this study is to investigate conditions under which ownership can be effective for constraining an exchange partner's opportunism. Using matched dyadic data for 296 hotel brands, we conduct multi-level hierarchical linear modeling and identify conditions under which common ownership limits hotel opportunism. Findings indicate that ownership can limit hotel opportunism when brand headquarters can easily monitor the hotel's activities.