The Effects of Innovation on Vertical Structure: Perspectives on Transaction Costs and Competences

By C. Wolter, Francisco M. Veloso. 2008

136 citations recorded by the source corpus.

We analyze how transaction cost economics and competence arguments determine vertical organization boundaries when firms react to innovation. Existing perspectives and empirical evidence have been ambiguous because of conflicting tensions between the two frameworks and simplistic views of innovation. Using Henderson and Clark's (1990) innovation categories and a careful review of both theories, we show that it is possible to reach a consistent set of predictions on vertical integration and to reconcile apparently conflicting empirical results.

Subfields: Strategy and Management

View Paper: https://www.semanticscholar.org/paper/0837dba0de2da4dbd6dd2df74ae60b754f7c2ae8

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In Strategy and Management

Citations in the corpus

Technology Ecosystem Governance (2014, background): “However, in letting a thousand flowers grow, unchecked variance in quality can lead to agency costs, where the platform core bears the negative costs of poor quality of the complementor or their applications (Wolter and Veloso, 2008).”
From rapid prototyping to home fabrication: How 3D printing is changing business model innovation (2016, background): “As noted in Wolter and Veloso (2008), the variation in the degree of vertical integration as a result of innovation essentially depends on the nature of the innovation considered.”
Management of innovation: role of psychological empowerment, work engagement and turnover intention in the Indian context (2012, background): “It has been noted that a significant need of innovation has emerged in the recession hit period (2008–2009), in uncertain markets, where innovation is the only source of competitive advantage (Wolter and Veloso 2008 ; Scheck and Glader 2008 ; Dervitsiotis 2010 ; Di Minin, Frattini and Piccaluga ”
Digital Technologies as External Enablers of New Venture Creation in the IT Hardware Sector (2018, background): “For example, increasing input variety can negatively aﬀect input and output quality (Wareham, Fox, & Giner, 2014), which increases transaction costs and coordination needs (Wolter & Portuguesa, 2008) and undermines a digital technology’s ability to provide compression and/or conservation mechanisms.”
The Mirroring Hypothesis: Theory, Evidence and Exceptions (2016, background): “These arguments were placed in a dynamic context by Wolter and Veloso (2008) who pointed out that obsolescence risk and the need to preserve outside options create forces causing fragmentation, and therefore firms and industries experiencing modular or radical innovations may have a propensity to…”
What Firms Make vs. What They Know: How Firms' Production and Knowledge Boundaries Affect Competitive Advantage in the Face of Technological Change (2012, unknown): “…challenge of obtaining detailed historical data that not only characterize product innovations according to the different types of technological change but also characterize focal firms according to how they are organized with respect to upstream and downstream activities (Wolter and Veloso 2008).”