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Do Agglomeration and Technology Affect Vertical Integration? Evidence from Italian Business Groups

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  • Giulio Cainelli
  • Donato Iacobucci

Abstract

The aim of this paper is to analyse the role of technology and spatial agglomeration in decisions about vertical integration. It starts from the hypothesis that the business group, defined as a set of firms under common ownership and control, is the appropriate unit to delimit the firm's boundary. We use information drawn from input-output tables to detect the presence of positive inter-industry exchanges and whether or not activities in a group are vertically related. Accounting for endogeneity problems, we estimate Probit and Linear Probability models to investigate the role of technology and spatial agglomeration on vertical integration decisions empirically. Consistent with property rights theory, our results show that the technology intensity of acquirers matters for backward integration choices and, moreover, that agglomeration plays a role in vertical integration only when it operates jointly with technology.

Suggested Citation

  • Giulio Cainelli & Donato Iacobucci, 2009. "Do Agglomeration and Technology Affect Vertical Integration? Evidence from Italian Business Groups," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 16(3), pages 305-322.
    • Handle: RePEc:taf:ijecbs:v:16:y:2009:i:3:p:305-322
    DOI: 10.1080/13571510903227049
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    References listed on IDEAS

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    1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, April.
    2. Chandler, Alfred D., 1990. "Scale and Scope: A Review Colloquium - Scale and Scope: The Dynamics of Industrial Capitalism. By Alfred D. ChandlerJr., with Takashi Hikino · Cambridge, Mass.: Harvard University Press, 1990. xix + 8," Business History Review, Cambridge University Press, vol. 64(4), pages 690-735, January.
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    Cited by:

    1. Giulio Cainelli & Donato Iacobucci, 2012. "Agglomeration, Related Variety, and Vertical Integration," Economic Geography, Clark University, vol. 88(3), pages 255-277, July.
    2. Tsekouras, Kostas & Chatzistamoulou, Nikos & Kounetas, Kostas & Broadstock, David C., 2016. "Spillovers, path dependence and the productive performance of European transportation sectors in the presence of technology heterogeneity," Technological Forecasting and Social Change, Elsevier, vol. 102(C), pages 261-274.
    3. Roberto Antonietti & Maria Rosaria Ferrante & Riccardo Leoncini, 2016. "Local market size, social capital and outsourcing: evidence from Emilia Romagna," Small Business Economics, Springer, vol. 47(1), pages 243-260, June.
    4. Roberto Antonietti & Maria Rosaria Ferrante & Riccardo Leoncini, 2014. "Trust your neighbour. Industrial relatedness, social capital and outsourcing," Papers in Evolutionary Economic Geography (PEEG) 1403, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Jan 2014.
    5. Antonietti, Roberto & Cainelli, Giulio & Lupi, Claudio, 2013. "Vertical disintegration and spatial co-localization: The case of Kibs in the metropolitan region of Milan," Economics Letters, Elsevier, vol. 118(2), pages 360-363.
    6. Isabel Diez-Vial & Emilio Alvarez-Suescun, 2010. "Geographical Agglomeration as an Alternative to Vertical Integration," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 36(4), pages 373-389, June.
    7. Brian T. McCann & Jeffrey J. Reuer & Nandini Lahiri, 2016. "Agglomeration and the choice between acquisitions and alliances: An information economics perspective," Strategic Management Journal, Wiley Blackwell, vol. 37(6), pages 1085-1106, June.
    8. Luca Ferrucci & Antonio Picciotti, 2013. "Il gruppo Margaritelli: dai sentieri della crescita a quelli della ristrutturazione e del Turnaround," MERCATI & COMPETITIVIT?, FrancoAngeli Editore, vol. 2013(4), pages 15-35.

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    More about this item

    Keywords

    Business Groups; Spatial Agglomeration; Technology; Vertical Integration;
    All these keywords.

    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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