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Asset Specificity and Vertical Integration in Franchising

ALANSON P. MINKLER and TIMOTHY A. PARK
Review of Industrial Organization
Vol. 9, No. 4 (August 1994), pp. 409-423
Published by: Springer
Stable URL: http://www.jstor.org/stable/41798523
Page Count: 15
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Asset Specificity and Vertical Integration in Franchising
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Abstract

This study empirically tests transaction cost hypotheses with the use of data on publiclyowned franchisee! firms. We employ measures of the proportion of company-owned outlets for the degree of integration and brand name capital for the degree of asset specificity. The results suggest that for the sampled firms the degree of asset specificity is positively related to the degree of vertical integration. Additionly, increases in the real interest rate and firm growth rates are found to be positively related with vertical integration, while increases in unanticipated growth and firm experience are negatively related with vertical integration.

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