Vertical integration in the U.S. auto industry

Abstract

Recent relinements in the theory of the firm suggest that organization form may be sensitive not only to the rlegree to which assets are specific to a transaction but afso to the type of capital employed. This paper reports evidence regarding the relative influence of transaction-specilic investments in physical and human capital on the pattern of vertical integration using new data obtained directly from U.S. auto manufacturers. The results support the proposition that investments in specialized technical know-how have a stronger infiuence than those in specialized physical capital on the decision to integrate production within the firm.

Determinants of Electronic Integration in the Insurance Industry: An Empirical Test

“…The critical determining condition for high transaction costs is the existence of transaction-specific assets (Williamson, 1975(Williamson, , 1985(Williamson, , 1989Klein, Crawford, and Alchian, 1978) Williamson (1979; 1985) argues that asset specificity is a major determinant of transaction costs. He contends that "the normal presumption that recurring transactions... will be efficiently mediated by autonomous market contracting is progressively weakened by asset specificity " (1979: p. 1548 (Monteverde and Teece, 1982; Masten, 1984; Masten, Meehan, and Snyder, 1989), forward integration into distribution (John and Weitz, 1988), preference for internal versus external suppliers (Walker and Poppo, 1991), sales force integration (Anderson, 1985;Anderson and Schmittlein, 1984), make versus buy in components (Walker and Weber, 1984), contract duration (Joskow, 1987) and joint ventures (Pisano, 1989 (Bakos and Treacy, 1986;demons and Row, 1989) there is a compelling logic to assess the impact of IT on modes of governance (Malone et al, 1987;Gurbaxani and Whang, 1991 (Malone et al, 1987) Gurbaxani and Whang (1991) (1985) draws on Polanyi's (1962) articulation of embedded human assets and Marschak's (1968) concept of unique assets to identify four forms of asset specificity: site, human, physical and dedicated assets. In the context of IT-mediated business relationships, we focus on the business process asset specificity.…”

Testing Organizational Economics Theories of Vertical Integration

“…(ii) Human capital specificity: Anderson (1985), Anderson and Coughlan (1987), Anderson and Schmittlein (1984), Armour and Teece (1980), Cavanaugh (1998), Coff (2003), Eramilli and Rao (1993), John and Weitz (1988), Klein (1989). Klein, Frazier, and Roth (1990), Masten et al (1989Masten et al ( , 1991, Masters and Miles (2002), Monteverde (1995), Monteverde and Teece (1982), Taylor, Shaoming, and Osland (1998), and Zaheer and Venkatraman (1995). (iii) Physical (dedicated) asset specificity: Bindseil (1997), Caves and Bradburd (1988), Globerman and Schwindt (1986), Heide and John (1988), Levy (1985), Lieberman (1991), MacDonald (1985, MacMillan et al (1986), Masten (1984), Monteverde and Teece (1982), Ulset (1996), and Weiss (1992Weiss ( , 1994.…”

The Mediated Effect of Formal and Informal Control on Governance Forms

“…Hierarchy implies authority and a reallocation of property rights (Rialp & Salas, 2002), i.e., the simultaneous presence of control over decisions and ownership (Coase, 1996;Lyons, 1994;Masten, Meehan, & Snyder, 1989;Perry, 1989); this idea is associated with formal control (Fryxell, Dooley, & Vryza, 2002;Miller, 2011). The degree of hierarchical governance decreases alongside the reduction of property rights and ownership; the intermediate points are hybrid forms, and the market is present when there is an absence of property rights and ownership.…”