The hold-up problem, a form of opportunism, has been the subject of much
investigation by researchers in fields such as economics or accounting. Despite
contractual protections, hold-ups still occur, and firms and researchers continue
to search for ways to avoid them and to encourage firms to make investments
that are socially optimal and specific to the relationship at hand. In this paper, I
review, synthesize, and classify analytical and empirical research aimed at
identifying and testing fomtal and infonnal hold-up mitigating mechanisms. as
well as suggest avenues for future research. My study integrates various
streams of research and is organized around strategic decision-making, that is,
decisions about organizational design, inter- and intra-firm trade, and resource
allocation.
I find that most analytical research has focused on fomtal controls to hold-
ups such as vertical integration, joint ownership, contracts, pricing mecha-
nisms, compensation, and interdependence, and has only recently begun to
complement these formal controls with informal substitutes for commitment
such as relational contracting and information asymmetry. Empirical research,
on the other hand, has focused overwhelmingly on informal controls. As this
review reveals, the various research streams have not all pursued investigations
of hold-ups to the same extent as research on organizational design and inter-
firm trade decisions, even though hold-ups are likely to have an impact on
intra-firm trade and resource allocation decisions. In sum, this review not only
integrates the findings of the various disciplines and research streams, but also
suggests directions future research might take.