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Author Miller, Fabienne
Title Essays on how to mitigate hold-ups
book jacket
Descript 183 p
Note Source: Dissertation Abstracts International, Volume: 68-09, Section: A, page: 3936
Adviser: Susan F. Haka
Thesis (Ph.D.)--Michigan State University, 2007
The first essay examines whether aggregated cost information provided by suppliers to buyers can mitigate the hold-up problem that occurs with idiosyncratic investments. Hold-up implies that, given the opportunity, buyers pursue a self-interested strategy and do not reimburse suppliers for their idiosyncratic investment. In essence, buyers seek to maximize their own trade surplus at the expense of suppliers. However, evidence suggests some firms pursue a fair strategy. With such firms, research suggests that hold-up can be avoided. I propose and provide empirical evidence that the level of aggregation of the supplier-provided cost information (i.e., fine or coarse) will interact with buyer strategy (i.e., self-interested or fair) to affect investment in idiosyncratic assets and trade opportunism. Results show that coarse information leads to an increase in (no change in) self-interested (fair) buyers' offers and in an increase in suppliers' investments. Thus, suppliers are better off when they disclose coarse rather than fine cost information. Findings also suggest that buyers will benefit from requesting coarse instead of fine cost information from suppliers
The second essay presents a review of analytical and empirical hold-up literature that spans economics, accounting, finance, and supply chain by examining strategic decisions made by firms. Relationship-specific investments render parties vulnerable to potential opportunism in dyads between firms (e.g., organizational design and make or buy decisions, and inter-firm trade decisions), between divisions (e.g., intra-firm trade and transfer pricing decisions) and between managers and their firm (e.g., resource allocation decisions). While overall results of analytical and empirical literature show that, consistent with theoretical predictions, integration, contractual terms, allocation of property rights, incentives and relational contracting are effective at mitigating hold-ups, review of the research conducted suggests two significant limitations of past research (and resulting opportunities for additional investigations). First, empirical literature has largely focused on inter-firm decisions and analytical research has targeted intra-firm decisions, but, to a large extent, resource allocation research seems to assume away the idiosyncratic nature of the investment made by managers who acquire firm-specific project information. Second, considerations of firm strategy and of private information of the investor have remained until recently absent from analyses of hold-ups and warrant further development
School code: 0128
Host Item Dissertation Abstracts International 68-09A
Subject Business Administration, Accounting
Alt Author Michigan State University
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