Competition, Governance, and Relationship-Specific Investments: Theory and Implications for Strategy
University of Southern California - Marshall School of Business
July 17, 2012
Strategic Management Journal, Forthcoming
Marshall School of Business Working Paper
This paper uses biform games to examine the endogenous decision to invest in relationship-specific assets. It addresses the questions of how competition affects suppliers’ decisions to produce a general-purpose product or a relationship-specific product for a buyer and under what circumstances a governance arrangement designed to share investment costs between the transacting parties increases the investment in relationship-specific assets. We offer a balanced perspective that emphasizes both the superior transaction value of relationship-specific products and their high transaction costs while considering the competition effects generated by alternative investment plans. The model and its extensions generate new insights into investment decisions regarding relationship-specific assets.
Number of Pages in PDF File: 41
Keywords: asset specificity, relationship-specific investment, competition, governance, biform gameAccepted Paper Series
Date posted: October 12, 2012
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