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Upstream or downstream in the value chain?

  • Singer, Marcos
  • Donoso, Patricio

Companies in the natural resources industry (e.g., mining, timber, farming and fishery) face the dilemma of whether to focus upstream or downstream in the value chain. The literature provides arguments and empirical evidence for either position. This paper presents an analytical framework based on the neoclassical theory of the firm, for which the best competitive advantage is the one that maximizes production efficiency. It serves to formulate an optimization model for the sawmill industry, and draws the data from the largest sawmilling company in the southern hemisphere. Although one conclusion is that the company should concentrate on the upstream activities, such conclusion is not applicable to other firms, since the analysis of the upstream-downstream dilemma must focus on the individual capabilities of each firm.

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Article provided by Elsevier in its journal Journal of Business Research.

Volume (Year): 61 (2008)
Issue (Month): 6 (June)
Pages: 669-677

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Handle: RePEc:eee:jbrese:v:61:y:2008:i:6:p:669-677
Contact details of provider: Web page: http://www.elsevier.com/locate/jbusres

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  1. Sachs, J-D & Warner, A-M, 1995. "Natural Resource Abundance and Economic Growth," Papers 517a, Harvard - Institute for International Development.
  2. Gaudet, Gerard & Long, Ngo Van & Soubeyran, Antoine, 1996. "Upstream-Downstream Specialization by Integrated Firms in a Partially Integrated Industry," Cahiers de recherche 9604, Université Laval - Département d'économique.
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  18. repec:dgr:uvatin:2000034 is not listed on IDEAS
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