Some leading manufactures vertically integrate wholesale functions in order to control those functions. Based on transaction cost analysis (TCA) and capability approach, this research proposes a conceptual framework why manufactures integrate wholesale functions or not. Specifically, it is suggested that human asset specificity and teachability positively related with vertical integration, while outside wholesaler know-how negatively related with vertical integration. Empirical analysis shows that decision on integration of wholesale functions are influenced by TCA and capability factors.

Large retailers use strategic alliances with suppliers in order to obtain customized distribution services from the suppliers. Forming strategic alliances with large retailers requires suppliers to make relationship-specific investments in the retailers. Transaction cost analysis suggests that the investments create a potential of hold up and discourage suppliers from forming the alliance. This study considers that regulatory focus of suppliers is a determinant of forming strategic alliance. It hypothesizes that promotion-focused suppliers are likely to accept an uncertain alliance with larger retailers even if it requires them to make relationship-specific investments. On the other hand, it is suggested that prevention-focused suppliers are unlikely to accept the same offer under the same conditions.