Optimal Production Channel for Private Labels: Too Much or Too Little Innovation?

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

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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 overinvest to increase its buyer power. When outsourcing, a hold-up effect leads to underinvestment. 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)
Date: 2015-06
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Citations: View citations in EconPapers (14)

Published in Journal of Economics and Management Strategy, 2015, 24 (2), pp.348-368. ⟨10.1111/jems.12098⟩

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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? (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-01242601

DOI: 10.1111/jems.12098

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