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Vertical Integration and Firm Productivity

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  • Hongyi Li
  • Yi Lu
  • Zhigang Tao

Abstract

This paper uses three cross‐industry datasets from China and other developing countries to study the effect of vertical integration on firm productivity. Our findings suggest that vertical integration has a negative impact on productivity, in contrast to recent studies based on U.S. firms. We argue that in settings with poor corporate governance, vertical integration reduces firm productivity because it enables inefficient rent‐seeking by insiders.

Suggested Citation

  • Hongyi Li & Yi Lu & Zhigang Tao, 2017. "Vertical Integration and Firm Productivity," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 26(2), pages 403-428, June.
    • Handle: RePEc:bla:jemstr:v:26:y:2017:i:2:p:403-428
    DOI: 10.1111/jems.12191
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    References listed on IDEAS

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    Cited by:

    1. Loren Brandt & Feitao Jiang & Yao Luo & Yingjun Su, 2022. "Ownership and Productivity in Vertically Integrated Firms: Evidence from the Chinese Steel Industry," The Review of Economics and Statistics, MIT Press, vol. 104(1), pages 101-115, March.

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