Competition, governance, and relationship-specific investments: Theory and implications for strategy
Article first published online: 22 MAR 2013
Copyright © 2013 John Wiley & Sons, Ltd.
Strategic Management Journal
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
- Article first published online: 22 MAR 2013
- Accepted manuscript online: 29 JAN 2013 11:09AM EST
- Manuscript Accepted: 17 JUL 2012
- Manuscript Revised: 16 JUL 2012
- Manuscript Received: 26 JUL 2010
- asset specificity;
- relationship-specific investment;
- 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.