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

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.
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https://halshs.archives-ouvertes.fr/halshs-01242601
Contributor : Naïla Louise-Rose Connect in order to contact the contributor
Submitted on : Sunday, December 13, 2015 - 12:52:30 PM
Last modification on : Wednesday, January 26, 2022 - 9:21:13 AM

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Claire Chambolle, Clémence Christin, Guy Meunier. Optimal Production Channel for Private Labels: Too Much or Too Little Innovation?. Journal of Economics and Management Strategy, Wiley, 2015, 24 (2), pp.348-368. ⟨10.1111/jems.12098⟩. ⟨halshs-01242601⟩

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