Vertical integration and technology: theory and evidence

"This paper investigates the determinants of vertical integration using data from the UK manufacturing sector. We find that the relationship between a downstream (producer) industry and an upstream (supplier) industry is more likely to be vertically integrated when the producing industry is mor...

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Bibliographic Details
Format: Book
Language:English
Published: Cambridge, Mass. National Bureau of Economic Research 2004
Series:National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 10997
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Online Access:Volltext
Summary:"This paper investigates the determinants of vertical integration using data from the UK manufacturing sector. We find that the relationship between a downstream (producer) industry and an upstream (supplier) industry is more likely to be vertically integrated when the producing industry is more technology intensive and the supplying industry is less technology intensive. Moreover, both of these effects are stronger when the supplying industry accounts for a large fraction of the producer's costs. These results are generally robust and hold with alternative measures of technology intensity, with alternative estimation strategies, and with or without controlling for a number of firm and industry-level characteristics. They are consistent with the incomplete contract theories of the firm that emphasize both the potential costs and benefits of vertical integration in terms of investment incentives"--National Bureau of Economic Research web site.
Physical Description:34, 12 S.

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