Vertical dis-integration and the reallocation of risk and revenues in production networks: the case of franchising

Project Summary:

This research asks whether vertical disintegration strategies, such as outsourcing and franchising, are merely efficiency-enhancing or if they are also strategies to manipulate the legal boundaries of the firm to gain greater revenues and shift risk onto less powerful suppliers, contractors and franchisees. The research focuses specifically on franchises and proposes to build a unique new dataset based on financial data from court cases. Particular areas of exploration include questions of bargaining power, risk, royalty rates, and contract terms.


Brian Callaci is a PhD candidate in economics at the University of Massachusetts, Amherst. His research explores the changing economic and legal boundaries of the firm under modes of vertical dis-integration such as outsourcing and franchising. His work focuses in particular on the role of bargaining power in determining the allocation of risks and rents in these dis-integrated production networks. Prior to entering academia, Brian was a researcher for several US labor unions.