The Role of Idiosyncratic Investment for the Collective Action of Firms. A Comparative Analysis of the Automotive and Textile Industries in South Africa
In: APSA 2009 Toronto Meeting Paper
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In: APSA 2009 Toronto Meeting Paper
SSRN
Working paper
SSRN
Working paper
In: Business and politics: B&P, Band 11, Heft 4, S. 1-32
ISSN: 1469-3569
With increasing fragmentation of worldwide production chains and the corresponding contracting relations between companies, the "firm as an inspector" has become a frequent phenomenon. Buyer firms deploy supervising activities over their suppliers' products and production processes in order to ensure their compliance with regulatory standards, thereby taking on tasks commonly performed by public authorities. Why would a firm engage in such activities? In this article we will analyze the conditions under which firms play the role of an inspector vis-à-vis their sub-contractor firms to guarantee compliance with quality and environmental regulations. We develop a theoretical argument based on transaction cost economics and institutionalism to offer hypothetical answers to this question and provide an empirical assessment of our hypotheses.