Manufacturing and Distribution Strategies, Distribution Channels, and Transaction Costs: The Case of Parallel Imported Automobiles

Authors


School of Accounting and Finance, Hong Kong Polytechnic University, Hung Hom, Hong Kong. Email: afvmok@polyu.edu.hk

Abstract

We examine how constraints on transnational corporations' official distribution channels, asset specificity, and bounded rationality of franchise dealers and parallel traders contribute to the sustainability of the parallel importation of automobiles. The manufacturing and distribution strategies employed by transnational corporations considerably add to the regional differences in the pricing and availability of specific models, as well as vehicle specifications. These necessary conditions enable opportunistic parallel traders to engage in arbitrage. The asset specificity of franchise dealers, bounded rationality, and opportunism of dealers and arbitrageurs sustain the parallel importation of automobiles. Copyright © 2012 John Wiley & Sons, Ltd.

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