The Fable of Fisher Body

Posted: 9 Jul 2001


General Motors' (GM) acquisition of Fisher Body is the classic example of market failure in the literature on contracts and the theory of the firm. According to the standard account, GM merged vertically with Fisher Body in 1926, a maker of auto bodies, because of concerns over transaction-specific investment and contractual hold up. That account exhibits errors of historical fact and interpretation. GM acquired a 60 percent interest in Fisher Body in 1919. Moreover, the contractual arrangements and working relationship prior to the 1926 merger exhibited trust rather than opportunism. Fisher Body's production technology did not exhibit asset specificity. The merger reflected economic considerations specific to that time, not some immutable market failure. We demonstrate that vertical integration was directed at improving coordination of production and inventories, assuring GM adequate supplies of auto bodies, and providing GM with access to the executive talents of the Fisher brothers.

JEL Classification: N82

Suggested Citation

Casadesus-Masanell, Ramon and Spulber, Daniel F., The Fable of Fisher Body. Available at SSRN:

Ramon Casadesus-Masanell (Contact Author)

Harvard University - Strategy Unit ( email )

Harvard Business School
Soldiers Field Road
Boston, MA 02163
United States
617-496-0176 (Phone)
617-496-5859 (Fax)


Daniel F. Spulber

Northwestern University - Kellogg School of Management ( email )

Kellogg Global Hub
2211 Campus Dr.
Evanston, IL 60208
United States
847-491-8675 (Phone)
847-467-1777 (Fax)

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