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Do Agglomeration and Technology Affect Vertical Integration? Evidence from Italian Business Groups

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  • Giulio Cainelli
  • Donato Iacobucci

Abstract

The aim of this paper is to analyse the role of technology and spatial agglomeration in decisions about vertical integration. It starts from the hypothesis that the business group, defined as a set of firms under common ownership and control, is the appropriate unit to delimit the firm's boundary. We use information drawn from input-output tables to detect the presence of positive inter-industry exchanges and whether or not activities in a group are vertically related. Accounting for endogeneity problems, we estimate Probit and Linear Probability models to investigate the role of technology and spatial agglomeration on vertical integration decisions empirically. Consistent with property rights theory, our results show that the technology intensity of acquirers matters for backward integration choices and, moreover, that agglomeration plays a role in vertical integration only when it operates jointly with technology.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal International Journal of the Economics of Business.

Volume (Year): 16 (2009)
Issue (Month): 3 ()
Pages: 305-322

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Handle: RePEc:taf:ijecbs:v:16:y:2009:i:3:p:305-322

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Related research

Keywords: Business Groups; Spatial Agglomeration; Technology; Vertical Integration;

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Cited by:
  1. Giulio Cainelli & Donato Iacobucci, 2012. "Agglomeration, Related Variety, and Vertical Integration," Economic Geography, Clark University, vol. 88(3), pages 255-277, 07.
  2. Roberto Antonietti & Maria Rosaria Ferrante & Riccardo Leoncini, 2014. "Trust your neighbour. Industrial relatedness, social capital and outsourcing," Papers in Evolutionary Economic Geography (PEEG) 1403, Utrecht University, Section of Economic Geography, revised Jan 2014.
  3. Isabel Diez-Vial & Emilio Alvarez-Suescun, 2010. "Geographical Agglomeration as an Alternative to Vertical Integration," Review of Industrial Organization, Springer, vol. 36(4), pages 373-389, June.
  4. Roberto Antonietti & Giulio Cainelli & Claudio Lupi, 2012. "Vertical disintegration and spatial co-localization: the case of Kibs in the Metropolitan Region of Milan," Openloc Working Papers 1202, Public policies and local development.

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