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Vertical Integration

In: Handbook of New Institutional Economics

Author

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  • Paul L. Joskow

    (Massachusetts Institute of Technology)

Abstract

Understanding the factors that determine which types of transactions are mediated through markets and which within hierarchical organizations called firms has been an important subject of theoretical and empirical work in microeconomics generally and central to work in New Institutional Economics (NIE) in particular for at least the last 25 years. This essay reviews research that examines the choice between governance of vertical relationships involving suppliers of intermediate goods and services (“upstream”) and the purchasers of those goods and services (“downstream”) through some form of market-based contractual arrangement versus governance within an organization through vertical integration. My primary emphasis is on the transaction cost economics (TCE) framework for understanding the choice of governance arrangements, though I will briefly discuss several other theories of vertical integration as well.

Suggested Citation

  • Paul L. Joskow, 2008. "Vertical Integration," Springer Books, in: Claude Ménard & Mary M. Shirley (ed.), Handbook of New Institutional Economics, chapter 13, pages 319-348, Springer.
    • Handle: RePEc:spr:sprchp:978-3-540-69305-5_14
    DOI: 10.1007/978-3-540-69305-5_14
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    Cited by:

    1. Benguria, Felipe, 2021. "The matching and sorting of exporting and importing firms: Theory and evidence," Journal of International Economics, Elsevier, vol. 131(C).

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