Firms, Organizations and Contracts: A Reader in Industrial Organization

By Peter J. Buckley; Jonathan Michie | Go to book overview

considered it would seem that many of the special requirements listed there do carry with them some implication of managerial control by the customer, over certain aspects of the supplier's activities. For example the influence of multiple retail food stores on the allocation of even the largest food manufacturers' promotional expenditure between 'below-the-line activity' (including such items as premium selling, game promotions, incentive schemes, etc.) and media advertising through the introduction of Private Brands is a case in point. 32 The food manufacturers would very much prefer not to have to increase below-the-line expenditure but have been forced into this position by the economic power of the large multiple stores, and by their direct demands for increased contributions for such items as 'key money' which the manufacturers seem unable to resist.

To conclude this section, it would seem that there is some evidence that many suppliers in a variety of industries are finding it very difficult to maintain their managerial independence from large customers.


7. Conclusions

There does seem to be some evidence that what this paper has described as 'vertical quasi-integration' does exist. The importance of understanding the extent of such relationships lies not only in the need to understand more fully the effect of a single firm's collapse--as in the Rolls-Royce case--but also because it may represent a considerable extension of large firms' influence in the economy which needs to be considered on policy grounds. As Barnes has pointed out:

Some of the important consequences of bigness depend, not upon the power of certain large enterprises, but upon the relative place of large-scale business organization in the economy as a whole. The farther we move toward an economy of a few large business units, the less we can count upon the automatic competitive adjustments to harmonize production demand, prices, and costs. 33

Perhaps what is required is some measure of a firm's influence in the vertical plane so that as well as having indicators of a firm's influence within its own industry, some measure of a firm's influence in the economy as a whole is obtained. Perhaps some measure along the lines of Hirschman's linkage concept would provide an indication of the extent of a firm's relationship with supplying industries. 34 Finally it should be noted that, in considering the power of one organization over another in the vertical plane, examples have

-336-

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Firms, Organizations and Contracts: A Reader in Industrial Organization
Table of contents

Table of contents

  • Title Page iii
  • Preface and Acknowledgements v
  • Acknowledgements vi
  • Contents viii
  • List of Contributors xi
  • Foreword xiii
  • Introduction and Overview 1
  • Notes 18
  • References 20
  • I. THEORY OF THE FIRM 21
  • 1: The Equilibrium of the Firm 23
  • 2: The Nature of the Firm 40
  • 3: The Organization of Industry 59
  • 4: Production, Information Costs, and Economic Organization 75
  • Summary 95
  • Notes 96
  • References 102
  • 5: Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure 103
  • Conclusions 151
  • Notes 151
  • References 163
  • 6: Transaction-Cost Economics: The Governance of Contractual Relations 168
  • Conclusion 192
  • 7: An Economist's Perspective on the Theory of the Firm 199
  • Conclusion 212
  • Notes 212
  • II. MARKETS AND INDUSTRIAL ORGANIZATION 219
  • 8: Corporate Culture and Economic Theory 221
  • Introduction 221
  • Conclusion 261
  • Appendix 262
  • Appendix 271
  • Appendix 273
  • References 274
  • 9: Co-operative Agreements and the Organization of Industry 276
  • References 292
  • 10: Interpenetration of Organization and Market: Japan's Firm and Market in Comparison with the US 293
  • Conclusion 317
  • References 319
  • 11: Vertical Quasi-Integration 320
  • Conclusions 336
  • Notes 337
  • 12: Non-Contractual Relations In Business: A Preliminary Study 339
  • 13: Goodwill and the Spirit of Market Capitalism 359
  • III. JOINT VENTURES, NETWORKS, AND] CLANS 383
  • III. JOINT VENTURES, NETWORKS, AND] CLANS 385
  • References 407
  • 15: Joint Ventures 410
  • Conclusion 427
  • References 428
  • 16: Organizations: New Concepts for New Forms 429
  • Conclusion 440
  • Notes 441
  • 17: Markets, Bureaucracies, and Clans 442
  • References 456
  • Notes 459
  • References 473
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