Creating holdup through vertical integration: Fisher Body revisited

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