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Vertical Integration and Market Structure

In: The Handbook of Organizational Economics

Author Info

  • Timothy Bresnahan
  • Jonathan Levin

Abstract

Contractual theories of vertical integration derive firm boundaries as an efficient response to market transaction costs. These theories predict a relationship between underlying features of transactions and observed integration decisions. There has been some progress in testing these predictions, but less progress in quantifying their importance. One difficulty is that empirical applications often must consider firm structure together with industry structure. Research in industrial organization frequently has adopted this perspective, emphasizing how scale and scope economies, and strategic considerations, influence patterns of industry integration. But this research has paid less attention to contractual or organizational details, so that these two major lines of research on vertical integration have proceeded in parallel with only rare intersection. We discuss the value of combining different viewpoints from organizational economics and industrial organization.

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This chapter was published in: Robert Gibbons & John Roberts (ed.) The Handbook of Organizational Economics, Princeton University Press, Princeton, NJ, pages , 2012.
This item is provided by Princeton University Press in its series Introductory Chapters with number 9889-21.
Handle: RePEc:pup:chapts:9889-21
Contact details of provider: Web page: http://press.princeton.edu

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Find related papers by JEL classification:
  • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
  • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
  • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
  • M20 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - General

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Cited by:

  1. Cantner, Uwe & Savin, Ivan & Vannuccini, Simone, 2016. "Replicator dynamics in value chains: Explaining some puzzles of market selection," Working Paper Series in Economics 83, Karlsruhe Institute of Technology (KIT), Department of Economics and Business Engineering.
  2. Robert S. Gibbons, 2010. "Inside Organizations: Pricing, Politics, and Path Dependence," Levine's Working Paper Archive 661465000000000249, David K. Levine.
  3. Buehler, Stefan & Burghardt, Dirk, 2013. "Globalization and Vertical Structure: An Empirical Investigation," Economics Working Paper Series 1310, University of St. Gallen, School of Economics and Political Science.
  4. Gregory S. Crawford, 2015. "The economics of television and online video markets," ECON - Working Papers 197, Department of Economics - University of Zurich.
  5. Tomoo Kikuchi & Kazuo Nishimura & John Stachurski, 2012. "Coase meets Tarski: New Insights from Coase's Theory of the Firm," KIER Working Papers 828, Kyoto University, Institute of Economic Research.
  6. Crawford, Gregory S., 2015. "The Economics of Television and Online Video Markets," CEPR Discussion Papers 10676, C.E.P.R. Discussion Papers.
  7. Bayo-Moriones, Alberto & Galdon-Sanchez, Jose Enrique & Gil, Ricard, 2013. "'Make-or-Buy' of Peripheral Services in Manufacturing: Evidence from Spanish Plant-Level Data," IZA Discussion Papers 7138, Institute for the Study of Labor (IZA).

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