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Testing Organizational Economics Theories of Vertical Integration

Author

Listed:
  • Lajili, Kaouthar

    (U of Ottawa)

  • Madunic, Marko

    (U of Illinois at Urbana-Champaign)

  • Mahoney, Joseph T.

    (U of Illinois at Urbana-Champaign)

Abstract

This paper classifies empirical research on vertical integration under four approaches--value-added-to-sales, qualitative-quantitative, input-output and microanalytic. The emphasis here is on the microanalytic approach which has accumulated the most systematic evidence to support its theoretical propositions. In particular, this paper emphasizes theoretical and empirical contributions from organizational economics (especially transaction costs and agency theories) for both vertical integration and (vertical) contracting. Limitations and methodological challenges concerning the empirical testing of theories of vertical integration are addressed and suggestions for further research are provided.

Suggested Citation

  • Lajili, Kaouthar & Madunic, Marko & Mahoney, Joseph T., 2007. "Testing Organizational Economics Theories of Vertical Integration," Working Papers 07-0104, University of Illinois at Urbana-Champaign, College of Business.
  • Handle: RePEc:ecl:illbus:07-0104
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    File URL: http://www.business.illinois.edu/Working_Papers/papers/07-0104.pdf
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    Cited by:

    1. Mahka Moeen & Deepak Somaya & Joseph T. Mahoney, 2013. "Supply Portfolio Concentration in Outsourced Knowledge-Based Services," Organization Science, INFORMS, vol. 24(1), pages 262-279, February.
    2. Cadot, Julien, 2014. "Agency costs of vertical integration: the case of wine business in France," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182671, European Association of Agricultural Economists.
    3. Tharun Dolla & Boeing Laishram, 2019. "Bundling in public–private partnership projects – a conceptual framework," International Journal of Productivity and Performance Management, Emerald Group Publishing Limited, vol. 69(6), pages 1177-1203, December.
    4. Richard Meade & Seini O’Connor, 2011. "Comparison of Long-term Contracts and Vertical Integration in Decentralized Electricity Markets," Chapters, in: Jean-Michel Glachant & Dominique Finon & Adrien de Hauteclocque (ed.), Competition, Contracts and Electricity Markets, chapter 4, Edward Elgar Publishing.
    5. Christian Balcells, 2022. "Determinants of firm boundaries and organizational performance: an empirical investigation of the Chilean truck market," Journal of Evolutionary Economics, Springer, vol. 32(2), pages 423-461, April.
    6. Moeen, Mahka & Somaya, Deepak & Mahoney, Joseph T., 2011. "Supply Portfolio Concentration in Outsourced Knowledge-Based Services," Working Papers 11-0106, University of Illinois at Urbana-Champaign, College of Business.
    7. Meade, Richard & O'Connor, R. Seini, 2009. "Comparison of Long-Term Contracts and Vertical Integration in Decentralised Electricity Markets," Working Paper Series 19124, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    8. Julien Cadot, 2015. "Agency costs of vertical integration—the case of family firms, investor-owned firms and cooperatives in the French wine industry," Agricultural Economics, International Association of Agricultural Economists, vol. 46(2), pages 187-194, March.
    9. Florian Kaiser & Robert Obermaier, 2020. "Vertical (Dis‑)Integration and Firm Performance: A Management Paradigm Revisited," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 72(1), pages 1-37, February.
    10. Chien-Ming Chen, 2017. "Supply Chain Strategies and Carbon Intensity: The Roles of Process Leanness, Diversification Strategy, and Outsourcing," Journal of Business Ethics, Springer, vol. 143(3), pages 603-620, July.
    11. Marcelo Bucheli & Joseph T. Mahoney & Paul M. Vaaler, 2010. "Chandler's Living History: "The Visible Hand" of Vertical Integration in Nineteenth Century America Viewed Under a Twenty-First Century Transaction Costs Economics Lens," Journal of Management Studies, Wiley Blackwell, vol. 47(s1), pages 859-883, July.
    12. Feng Zhu & Qihong Liu, 2018. "Competing with complementors: An empirical look at Amazon.com," Strategic Management Journal, Wiley Blackwell, vol. 39(10), pages 2618-2642, October.
    13. Sharon Horsky & Steven C. Michael & Alvin J. Silk, 2008. "The Internalization of Advertising Services: An Inter-IndustryAnalysis," Harvard Business School Working Papers 09-007, Harvard Business School.
    14. Luigi Pascali, 2009. "Contract Incompleteness, Globalization and Vertical Structure: an Empirical Analysis," Boston College Working Papers in Economics 727, Boston College Department of Economics.
    15. José G. Vargas Hernández & Mohammad Reza Noruzi, 2010. "The Study of Three Organizational Enigmas; Organizational Economy, Organizational Business and Organizational Skills," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 1(1), pages 68-87, March.
    16. Horsky Sharon & Michael Steven C. & Silk Alvin J., 2012. "The Internalization of Advertising Services: An Inter-Industry Analysis," Review of Marketing Science, De Gruyter, vol. 10(1), pages 1-35, October.
    17. Konstantinos Poulis & Gregorios C. Galanakis & Gregory T. Triantafillou & Efthimios Poulis, 2020. "Value migration: digitalization of shipping as a mechanism of industry dethronement," Journal of Shipping and Trade, Springer, vol. 5(1), pages 1-18, December.
    18. Meade, Richard & O'Connor, R. Seini, 2009. "Comparison of Long-Term Contracts and Vertical Integration in Decentralised Electricity Markets," Working Paper Series 19125, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.

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