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Vertical integration and efficiency: an application to the Italian machine tool industry

  • Fabio Pieri

    ()

  • Enrico Zaninotto

    ()

This paper analyzes the relationship between firm efficiency and vertical integration in the Italian machine tool (MT) industry. The link may really be the result of a two-way causality: the effect may run from productive efficiency to the type of vertical organization (i.e. vertical integration or outsourcing), as a self-selection mechanism, or an effect from the organizational mode to the firm’s performance may (also) be at work. This relationship is empirically investigated in a novel panel dataset comprising about 500 Italian MT builders, implementing two equations and instrumental variables for the two directions of causality. The evidence clearly indicates the self-selection mechanism of the most efficient firms in vertically integrated structures, while an effect from the organizational mode to the firm’s efficiency is not supported. Copyright Springer Science+Business Media, LLC. 2013

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File URL: http://hdl.handle.net/10.1007/s11187-011-9367-y
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Article provided by Springer in its journal Small Business Economics.

Volume (Year): 40 (2013)
Issue (Month): 2 (February)
Pages: 397-416

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Handle: RePEc:kap:sbusec:v:40:y:2013:i:2:p:397-416
DOI: 10.1007/s11187-011-9367-y
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