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Research Article

Competition, governance, and relationship-specific investments: Theory and implications for strategy

  1. Nan Jia*

Article first published online: 22 MAR 2013

DOI: 10.1002/smj.2077

Additional Information

How to Cite

Jia, N. (2013), Competition, governance, and relationship-specific investments: Theory and implications for strategy. Strat. Mgmt. J.. doi: 10.1002/smj.2077

Author Information

  1. Marshall School of Business, University of Southern California, Los Angeles, California, U.S.A.

*Correspondence to: Nan Jia, Marshall School of Business, University of Southern California, Los Angeles, CA 90089, U.S.A. E-mail: nan.jia@marshall.usc.edu

Publication History

  1. Article first published online: 22 MAR 2013
  2. Accepted manuscript online: 29 JAN 2013 11:09AM EST
  3. Manuscript Accepted: 17 JUL 2012
  4. Manuscript Revised: 16 JUL 2012
  5. Manuscript Received: 26 JUL 2010

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Keywords:

  • asset specificity;
  • relationship-specific investment;
  • competition;
  • governance;
  • biform game

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. Copyright © 2013 John Wiley & Sons, Ltd.

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