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Giorgio Zanarone, CUNEF Print
Tuesday, 28 November 2017, 14:00 - 15:15

Giorgio Zanarone, Colegio Universitario de Estudios Financieros

The Value of Relational Adaptation in Outsourcing: Evidence from the 2008 Shock to the U.S. Airline Industry

Abstract : Major airlines expect their outsourced regional partners to adapt flight schedules and exchange landing slots under bad weather. We show that for these informal agreements to be self-enforcing, partnerships’ value must exceed their total adaptation cost. Therefore, outsourcing of a route is more likely to remain self-enforcing after a shock the higher the network’s pre-shock adaptation cost, and hence its value. We analyze U.S. airlines around the 2008 crisis and find that consistent with relational adaptation, routes in networks with worse weather, and hence higher adaptation cost, were more likely to remain outsourced to the same partner after the crisis.


Location: R42.2.113
Contact: Nancy De Munck - This e-mail address is being protected from spam bots, you need JavaScript enabled to view it