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"Why Firms Make Unilateral Investments Specific to Other Firms: The Case of OEM Suppliers"

Min-Ping Kang, Joseph T. Mahoney, and Danchi Tan


First Author :

Min-Ping Kang
Communications Management
Associate Professor, Shih Hsin University
1, Lane 17, Muzha Rd., Sec. 1
Wenshan, Taipei 11623

886222368225 ext. 3316
886222360283 (Fax)

Second Author :

Joseph T. Mahoney
Business Administration
Professor of Strategic Management, University of Illinois
University of Illinois at Urbana-Champaign, College of Business
140C Wohlers Hall
1206 S. Sixth Street, MC 706
Champaign, IL 61820

217-244-7969 (Fax)

Third Author :

Danchi Tan
International Business
Associate Professor, National Chengchi University
64, Chih-nan Rd., Sec. 2
Wenshan, Taipei 11623

886229393091 ext. 81139
886229387699 (Fax)

Abstract :
This paper examines why and under what conditions firms will make unilateral relationship- specific investments to serve their transaction partners. We propose that firms are more likely to make unilateral relationship-specific investments when the investment yields economic spillover values for other transactions with the same exchange partners as well as for third-party transactions. We also model two types of positive inter-project spillover effects that a transaction may generate: knowledge spillovers and reputation spillovers. We find empirical support for our developed theory in the context of Taiwanese suppliers of Original Equipment Manufacturers.
Keywords :
knowledge spillover, OEM, reputation spillover, Unilateral relationship-specific investment
Footnotes & Acknowledgements :
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Manuscript Received : 2007
Manuscript Published : 2007
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