Vertical Integration in High-Transaction Cost Sectors: the Case of the Bulgarian Pharmaceutical Industry
AbstractEconomic 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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Bibliographic InfoArticle 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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Web page: http://www.asers.eu/journals/jarm.html
Vertical integration; transaction costs; asset specificity; distribution;
Find related papers by JEL classification:
- L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
- I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
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- 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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