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The Fisher Body Case and Organizational Economics

Richard Langlois ()

No 2018-13, Working papers from University of Connecticut, Department of Economics

Abstract: In 1919, General Motors acquired a non-controlling equity interest in the Fisher Body Company and signed a ten-year contract stipulating the terms under which Fisher would be the exclusive supplier of car bodies to GM. In 1926, GM acquired the remaining equity in Fisher Body. In 1978, Benjamin Klein, Robert Crawford, and Armen Alchian used the GM acquisition of Fisher Body as an illustration of the asset-specificity or “holdup” theory of vertical integration. Their paper became widely influential, and the Fisher case quickly developed into an omnipresent meme in the economics of organization. In the year 2000, however, the meme suddenly exploded into a cause célèbre. No fewer than five papers appeared attacking both the theory and the history in the Klein et al. account – including a paper by Nobel Laureate Ronald Coase, who entered into an often-contentious debate with Klein. This paper tells the story of the Fisher Body acquisition and of the academic controversy it spawned. The controversy has lessons – including some surprising and ironic lessons – for the economic history of the American automobile industry, for the economics of organization, and for the conduct of inquiry in economics.

Keywords: transaction costs; vertical integration; asset specificity; automobile industry (search for similar items in EconPapers)
JEL-codes: B2 D23 D86 L14 L24 L62 N62 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2018-07
New Economics Papers: this item is included in nep-com, nep-his, nep-hpe and nep-pke
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Handle: RePEc:uct:uconnp:2018-13