Affiliation, Integration, and Information: Ownership Incentives and Industry Structure

30 Pages Posted: 17 May 2001

Multiple version iconThere are 2 versions of this paper

Date Written: May 2001

Abstract

This paper presents theory and evidence on horizontal industry structure, focusing on situations where plant-level scale economies are small and market power is not an issue. At issue is the question: what makes industries necessarily fragmented? The theoretical model distinguishes between the structure of brands and firms in an industry by examining trade-offs associated with affiliation and integration, and how they are affected by the contracting environment. I show how contractual incompleteness can lead industries to be necessarily fragmented. I also show that improvements in the contracting environment will tend to lead to a greater concentration of brands, but whether they lead industries to be more or less concentrated depends on what becomes contractible. I then discuss the propositions generated by the model through a series of case study examples.

Keywords: industry structure, integration, incomplete contracts

JEL Classification: L11, L22

Suggested Citation

Hubbard, Thomas N., Affiliation, Integration, and Information: Ownership Incentives and Industry Structure (May 2001). Available at SSRN: https://ssrn.com/abstract=269245 or http://dx.doi.org/10.2139/ssrn.269245

Thomas N. Hubbard (Contact Author)

Northwestern University - Department of Management & Strategy ( email )

Kellogg School of Management
2001 Sheridan Road
Evanston, IL 60208
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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