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Forest-mill integration: A transaction cost perspective

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  • Niquidet, Kurt
  • O'Kelly, Glen

Abstract

In Canada, where public ownership of forestland is prevalent, a central decision facing policy makers is how to allocate timber resources to private forest companies. Debates tend to focus around what proportion of the annual harvest should be devoted to markets as opposed to long-term contracts. To give a guide to policy makers, we surveyed forest firms from New Zealand and Sweden where this decision is based purely on a commercial basis. On average, mills source fifty percent of their fibre from the market. However, using a fractional logit model, we test whether theories from transaction cost economics influence this decision. Results are consistent with transaction cost economics; firms decrease the proportion of fibre sourced from a market with increasing fibre specificity, capital intensity, forest ownership concentration and uncertainty.

Suggested Citation

  • Niquidet, Kurt & O'Kelly, Glen, 2010. "Forest-mill integration: A transaction cost perspective," Forest Policy and Economics, Elsevier, vol. 12(3), pages 207-212, March.
  • Handle: RePEc:eee:forpol:v:12:y:2010:i:3:p:207-212
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    Cited by:

    1. Kimmich, Christian & Fischbacher, Urs, 2016. "Behavioral determinants of supply chain integration and coexistence," Journal of Forest Economics, Elsevier, vol. 25(C), pages 55-77.
    2. Brodrechtova, Yvonne, 2015. "Economic valuation of long-term timber contracts: Empirical evidence from Germany," Forest Policy and Economics, Elsevier, vol. 55(C), pages 1-9.
    3. Korhonen, J. & Zhang, Y. & Toppinen, A., 2016. "Examining timberland ownership and control strategies in the global forest sector," Forest Policy and Economics, Elsevier, vol. 70(C), pages 39-46.

    More about this item

    Keywords

    Transaction costs Forest tenure Vertical integration;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L73 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Forest Products

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