Why Do Firms Own Production Chains?
AbstractWe use broad-based yet detailed data from the economy’s goods-producing sectors to investigate firms’ ownership of production chains. It does not appear that vertical ownership is primarily used to facilitate transfers of goods along the production chain, as is often presumed: Roughly one-half of upstream plants report no shipments to their firms’ downstream units. We propose an alternative explanation for vertical ownership, namely that it promotes efficient intra-firm transfers of intangible inputs. We show evidence consistent with this hypothesis, including the fact that upon a change of ownership, an acquired plant begins to resemble the acquiring firm along multiple dimensions.
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Date of creation: Apr 2012
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Other versions of this item:
- L0 - Industrial Organization - - General
- L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
- L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
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- NEP-ALL-2012-05-08 (All new papers)
- NEP-BEC-2012-05-08 (Business Economics)
- NEP-COM-2012-05-08 (Industrial Competition)
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