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

• Autores: Claire Chambolle, Clémence Christin, Guy Meunier
• Localización: Journal of Economics & Management Strategy, ISSN-e 1530-9134, Vol. 24, Nº. 2, 2015, págs. 348-368
• Idioma: inglés
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• Resumen

  • 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.