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Vertical Foreclosure in the Global Production Network

Author

Listed:
  • Johannes Boehm

    (Princeton University)

  • Jan Sonntag

    (Sciences Po Paris)

Abstract

This paper studies the prevalence of market foreclosure using a novel dataset on U.S. and international buyer-seller relationships, and across a large range of industries. We find that relationships are more likely to break when suppliers vertically integrate with one of the buyers' competitors than when they vertically integrate with an unrelated firm. We establish causality using the prevalence of past vertical integration among related parties as an instrument. Foreclosure is more prevalent when suppliers have more market power. Furthermore, we find a substantial drop in performance among foreclosed firms.

Suggested Citation

  • Johannes Boehm & Jan Sonntag, 2018. "Vertical Foreclosure in the Global Production Network," 2018 Meeting Papers 677, Society for Economic Dynamics.
    • Handle: RePEc:red:sed018:677
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    References listed on IDEAS

    as
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    Cited by:

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    2. Giuseppe Berlingieri & Frank Pisch & Claudia Steinwender, 2018. "Organizing Global Supply Chains: Input Cost Shares and Vertical Integration," NBER Working Papers 25286, National Bureau of Economic Research, Inc.

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