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Vertical Integration in High-Transaction Cost Sectors: the Case of the Bulgarian Pharmaceutical Industry

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Author Info

  • Tamara TODOROVA

    ()
    (Department of Economics, American University in Bulgaria, Bulgaria)

Abstract

Economic theory provides various explanations for vertical integration but transaction costs seem to be a major determinant of backward, forward and lateral integration. The paper studies integration trends in the newly emerging Bulgarian pharmaceutical sector, seeking transaction cost explanations to the forward integration taking place in it. We hypothesize that asset specificity, above all, determines many of the organizational transformations and adaptations Bulgarian pharmaceutical companies are undergoing. Having special attributes, their products and assets seem to favor a larger size of the companies. Furthermore, as a low-trust, high-transaction cost economy, the Bulgarian economy dictates that a larger scale of operations be internalized within firms rather than carried out by the market.

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File URL: http://www.asers.eu/journals/jarm/jarlm-issues.html
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Bibliographic Info

Article provided by ASERS Publishing in its journal Journal of Advanced Research in Management.

Volume (Year): I (2010)
Issue (Month): 2 (December)
Pages: 127 - 138

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Handle: RePEc:srs:jarm12:7:v:1:y:2010:i:2:p:127-138

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Web page: http://www.asers.eu/journals/jarm.html

Related research

Keywords: Vertical integration; transaction costs; asset specificity; distribution;

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Cited by:
  1. Tamara Todorova, 2011. "Adverse Effects of Transaction Costs in East European Economies," Organizations and Markets in Emerging Economies, Faculty of Economics, Vilnius University, vol. 2(1).

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