Asset Specificity - Multidimensionality

Multidimensionality

Scholars have acknowledged the multidimensional property of asset specificity. For example, Williamson (1983) identified four dimensions of asset specificity:

• Site specificity, e.g. a natural resource available at a certain location and movable only at great cost;
• Physical asset specificity, e.g. a specialized machine tool or complex computer system designed for a single purpose;
• Human asset specificity, i.e., highly specialized human skills, arising in a learning by doing fashion; and
• Dedicated assets, i.e. a discrete investment in a plant that cannot readily be put to work for other purposes.

Malone et al. (1987) made an important addition to the above list:

• Time specificity, an asset is time specific if its value is highly dependent on its reaching the user within a specified, relatively limited period of time.

Joskow (1988) pointed out that these different categories point to essentially the same phenomenon, but that it is instructive in empirical analyses to treat each category distinctly. Joskow's series of papers have looked at contract structuring in order to examine how contracts mitigate transaction costs inherent in a market based relationship

Zaheer and Venkatraman (1994) acknowledge four asset specificity dimensions: site, human, physical, and dedicated assets. In addition, they define two dimensions of asset specificity in their study: human asset specificity and the newly-developed "procedural asset specificity", where

• Human asset specificity deals with the degree to which skills, knowledge and experience of the agency's personnel are specific to the business process.
• Procedural asset specificity incorporates notions of human asset specificity and refers to the degree that an agency's workflows and processes are customized to exploit the other party's capabilities.

Most theoretical work focus on the relationships between asset specificity and sunk cost effects, transaction costs, vertical integration, and uncertainties (e.g., see Joskow 1988, Anderson 1985, John and Weitz 1988, and Whyte 1994).