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An empirical evaluation of factors determining vertical integration in U.S. food manufacturing industries

  • Sanjib Bhuyan

    (Department of Agricultural, Food & Resource Economics, Rutgers University, 55 Dudley Road, New Brunswick, NJ 08901-8520)

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    Vertical integration has become an important business strategy among food manufacturers because it allows them to manage and customize their production according to consumer needs. Economic theory has shown that vertical integration may be induced by transaction costs, demand variability, market power motives, and other factors. This paper presents an index of forward vertical integration for U.S. food manufacturing industries and uses an econometric analysis to examine the factors that motivate vertical integration in these industries. Empirical results indicate the role of both transaction cost factors and potential monopoly motives. [JEL Classification: L13, Q13.] © 2005 Wiley Periodicals, Inc. Agribusiness 21: 429-445, 2005.

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    Article provided by John Wiley & Sons, Ltd. in its journal Agribusiness.

    Volume (Year): 21 (2005)
    Issue (Month): 3 ()
    Pages: 429-445

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    Handle: RePEc:wly:agribz:v:21:y:2005:i:3:p:429-445
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    1. Lieberman, Marvin B, 1991. "Determinants of Vertical Integration: An Empirical Test," Journal of Industrial Economics, Wiley Blackwell, vol. 39(5), pages 451-66, September.
    2. M. A. Adelman, 1955. "Concept and Statistical Measurement of Vertical Integration," NBER Chapters, in: Business Concentration and Price Policy, pages 281-330 National Bureau of Economic Research, Inc.
    3. Maddigan, Ruth J, 1981. "The Measurement of Vertical Integration," The Review of Economics and Statistics, MIT Press, vol. 63(3), pages 328-35, August.
    4. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    5. Martinez, Stephen W., 1999. "Vertical Coordination in the Pork and Broiler Industries: Implications for Pork and Chicken Products," Agricultural Economics Reports 34031, United States Department of Agriculture, Economic Research Service.
    6. Ronald W. Cotterill, 2001. "Neoclassical explanations of vertical organization and performance of food Industries," Agribusiness, John Wiley & Sons, Ltd., vol. 17(1), pages 33-57.
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