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Impact Of Vertical Mergers On Food Industry Profitability: An Empirical Evaluation

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  • Bhuyan, Sanjib
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    Abstract

    Vertical integration is an important business strategy among firms in the U.S. food industries. Our objective is to test one of the perceived benefits of vertical integration - improved profitability of the integrated firm. Findings show that increased vertical mergers in food industries would lower profits.

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    File URL: http://purl.umn.edu/20469
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    Bibliographic Info

    Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2001 Annual meeting, August 5-8, Chicago, IL with number 20469.

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    Date of creation: 2001
    Date of revision:
    Handle: RePEc:ags:aaea01:20469

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    Related research

    Keywords: vertical integration; mergers; market performance; industry profitability; Agribusiness; Industrial Organization;

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    1. Ian Domowitz & R. Glenn Hubbard & Bruce C. Petersen, 1986. "Business Cycles and the Relationship Between Concentration and Price-Cost Margins," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 1-17, Spring.
    2. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    3. Waterman, David & Weiss, Andrew A., 1996. "The effects of vertical integration between cable television systems and pay cable networks," Journal of Econometrics, Elsevier, vol. 72(1-2), pages 357-395.
    4. James W. Meehan, Jr. & Eric S. Rosengren, 1993. "Empirical evidence on vertical foreclosure," Working Papers 93-4, Federal Reserve Bank of Boston.
    5. Azzeddine Azzam, 1996. "Testing the Monopsony-Inefficiency Incentive for Backward Integration," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(3), pages 585-590.
    6. R. Preston McAfee, 1999. "The effects of vertical integration on competing input suppliers," Economic Review, Federal Reserve Bank of Cleveland, issue Q I, pages 2-8.
    7. McBride, Mark E, 1983. "Spatial Competition and Vertical Integration: Cement and Concrete Revisited," American Economic Review, American Economic Association, vol. 73(5), pages 1011-22, December.
    8. Caves, Richard E. & Bradburd, Ralph M., 1988. "The empirical determinants of vertical integration," Journal of Economic Behavior & Organization, Elsevier, vol. 9(3), pages 265-279, April.
    9. Kirk Monteverde & David J. Teece, 1982. "Supplier Switching Costs and Vertical Integration in the Automobile Industry," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 206-213, Spring.
    10. Ghemawat, Pankaj & Caves, Richard E, 1986. "Capital Commitment and Profitability: An Empirical Investigation," Oxford Economic Papers, Oxford University Press, vol. 38(0), pages 94-110, Suppl. No.
    11. M. A. Adelman, 1955. "Concept and Statistical Measurement of Vertical Integration," NBER Chapters, in: Business Concentration and Price Policy, pages 281-330 National Bureau of Economic Research, Inc.
    12. Maddigan, Ruth J, 1981. "The Measurement of Vertical Integration," The Review of Economics and Statistics, MIT Press, vol. 63(3), pages 328-35, August.
    13. Esposito, Louis & Esposito, Frances Ferguson, 1971. "Foreign Competition and Domestic Industry Profitability," The Review of Economics and Statistics, MIT Press, vol. 53(4), pages 343-53, November.
    14. Perry, Martin K., 1989. "Vertical integration: Determinants and effects," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 4, pages 183-255 Elsevier.
    15. Tucker, Irvin B & Wilder, Ronald P, 1977. "Trends in Vertical Integration in the U.S. Manufacturing Sector," Journal of Industrial Economics, Wiley Blackwell, vol. 26(1), pages 81-94, September.
    16. Levy, David T, 1985. "The Transactions Cost Approach to Vertical Integration: An Empirical Examination," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 438-45, August.
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