Williamson points out that governance costs may be one source of pressure for firms to vertically integrate through merger or acquisition.

Williamson points out that governance costs may be one source of pressure for firms to vertically integrate through merger or acquisition. He borrows the example of General Motors and Fisher Body from Klein, et al (1978) to illustrate his point. Which of these factors was the underlying condition that gave rise to this merger?

a)General Motors’ demand for closed bodies from Fisher increased significantly above the levels contracted for originally

b)Fisher resisted moving its plants adjacent to GM facilities for fear of being locked-in and therefore incurred higher transportation and inventory costs

c)GM was ill-equipped in the short term to produce closed bodies

d)The contract with Fisher which precluded GM from manufacturing its own closed bodies, enabled Fisher to resist making more asset-specific investment, and thus delayed increased production was an inadequate governance structure from GM’s perspective

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