Vertical integration and efficiency: an application to the Italian machine tool industry
AbstractThis paper analyzes the relationship between firm efficiency and vertical integration in the Italian machine tool (MT) industry. The link may really be the result of a two-way causality: the effect may run from productive efficiency to the type of vertical organization (i.e. vertical integration or outsourcing), as a self-selection mechanism, or an effect from the organizational mode to the firm’s performance may (also) be at work. This relationship is empirically investigated in a novel panel dataset comprising about 500 Italian MT builders, implementing two equations and instrumental variables for the two directions of causality. The evidence clearly indicates the self-selection mechanism of the most efficient firms in vertically integrated structures, while an effect from the organizational mode to the firm’s efficiency is not supported. Copyright Springer Science+Business Media, LLC. 2013
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Bibliographic InfoArticle provided by Springer in its journal Small Business Economics.
Volume (Year): 40 (2013)
Issue (Month): 2 (February)
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Web page: http://www.springerlink.com/link.asp?id=100338
Vertical integration; Technical efficiency; Italian machine tool industry; Firm heterogeneity; Instrumental variables; D24; L22; L23; L26; L64;
Other versions of this item:
- Fabio Pieri & Enrico Zaninotto, 2010. "Vertical Integration and Efficiency: an application to the Italian Machine Tool Industry," DISA Working Papers 1006, Department of Computer and Management Sciences, University of Trento, Italy, revised 24 Nov 2010.
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
- L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
- L64 - Industrial Organization - - Industry Studies: Manufacturing - - - Other Machinery; Business Equipment; Armaments
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