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Agency costs of vertical integration—the case of family firms, investor-owned firms and cooperatives in the French wine industry

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  • Julien Cadot

Abstract

Vertical integration theory has long suggested internal costs related to changes in incentives due to vertical integration, which means that vertical integration may lead to agency costs. In this work, we specify the notion of agency costs of vertical integration and extend Ang et al. (2000)'s measurement of agency costs to provide an empirical assessment of these costs in the French wine industry. Our econometric analysis finds that the agency costs of vertical integration may reach 2–3% of sales. It also showed that operating expenses of vertical integration are lower for cooperatives than for other firms, while vertical integration is less rewarding for them. This raises questions on the relation between agency costs in cooperatives and their performance.

Suggested Citation

  • Julien Cadot, 2015. "Agency costs of vertical integration—the case of family firms, investor-owned firms and cooperatives in the French wine industry," Agricultural Economics, International Association of Agricultural Economists, vol. 46(2), pages 187-194, March.
    • Handle: RePEc:bla:agecon:v:46:y:2015:i:2:p:187-194
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    Cited by:

    1. Noriaki Hashimoto, 2021. "Self-Expansion or Internalization as the Two Processes of Vertical Integration: What Informs the Decision?," Economies, MDPI, vol. 9(4), pages 1-14, December.
    2. Jasper GRASHUIS & Ye SU, 2019. "A Review Of The Empirical Literature On Farmer Cooperatives: Performance, Ownership And Governance, Finance, And Member Attitude," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 90(1), pages 77-102, March.
    3. Timothy Waring & Taylor Lange & Sujan Chakraborty, 2022. "Institutional adaptation in the evolution of the ‘co-operative principles’," Journal of Evolutionary Economics, Springer, vol. 32(1), pages 333-365, January.
    4. Wanglin Ma & Awudu Abdulai, 2017. "The economic impacts of agricultural cooperatives on smallholder farmers in rural China," Agribusiness, John Wiley & Sons, Ltd., vol. 33(4), pages 537-551, September.
    5. Liu, Y., 2018. "Determinants and impacts of marketing channel choice among cooperatives members: Evidence from agricultural cooperative in China," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 275898, International Association of Agricultural Economists.

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