Optimal production channel for private labels: Too much or too little innovation?

Claire Chambolle (), Clémence Christin () and Guy Meunier

No 2014-02, Working Papers from Alimentation et Sciences Sociales

Abstract: We analyze the impact of the private label production channel on innovation. A retailer may either choose to integrate backward with a small firm (insourcing) or rely on a national brand manufacturer (outsourcing) to produce its private label. The trade-off between insourcing and outsourcing strategies is a choice between too much or too little innovation (i.e. quality investment) on the private label. When insourcing, an outside-option effect leads the retailer to over-invest to increase its buyer power. When outsourcing, a hold-up effect leads to under-investment. In addition, selecting the national brand manufacturer may create economies of scale that spur innovation.

Keywords: Private label; vertical relations; buyer power; innovation (search for similar items in EconPapers)
JEL-codes: L14 L15 L42 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2014-07
New Economics Papers: this item is included in nep-com, nep-ind, nep-ino, nep-ipr and nep-pr~
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Optimal Production Channel for Private Labels: Too Much or Too Little Innovation? (2015)
Working Paper: Optimal Production Channel for Private Labels: Too Much or Too Little Innovation? (2015)
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