This is a case study of asset specific investments, a class of transactions that is well understood in the context of economic theory but that is under-analyzed empirically. Because specific investments are particular to a single location, use or customer, their next best use is of much lower value than the use for which they are initially intended. Consequently, asset specific investments face the threat of ex post opportunism and allocative inefficiency. This contracting problem is particularly difficult when firms that are otherwise rivals must coordinate individual investments to create a shared resource. In such cases, generating credible expectations of cooperation among rivals is critical to coordinating these investments. The case of @Home Corporation is an example of how rival cable companies were able to employ “hybrid” structures including contractual safeguards like joint ownership, specialized governance devices and economic lock-in to overcome the problem of asset specificity and then build out a nationwide cable-based online service network during the 1990s. As the market subsequently develope alternatives to @Home, the economic lock-in required to induce cooperation failed to materialize, and @Home collapsed. The ultimate failure of @Home points out that those strategies that provide the proper ex ante incentives many not always be durable, leaving contracting parties with less than perfect options.
Brian J.M. Quinn. "Asset Specificity and Transaction Structures: A Case Study of @Home Corporation." Harvard Negotiation Law Review 15, (2010): 77-113.