Creating Hold-Up Through Vertical Integration : Fisher Body Revisited

General Motors' 1926 acquisition of Fisher Body has long served as a cornerstone of hold-up arguments for vertical integration. This paper utilizes primary historical evidence to make three related claims. First, it shows that GM's initial investment in Fisher occurred primarily to gain access to the Fisher brothers' specialized human assets. Second, it shows that hold-up was not the cause of GM's purchase of Fisher. Instead, the primary factors leading to vertical integration were GM management's fears over the Fisher brothers' impending departure, coupled with problems of financing new body plants. Finally, I show that while hold-up was not an issue prior to integration, the Fisher brothers successfully held up GM after they became employees. Far from reducing opportunistic behavior, vertical integration increased GM's vulnerability to rent-seeking behavior based in human asset specificity