VI and alternatives.pdf

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Economics for Management Studies
Victor Yu

Organizing Vertical Boundaries Vertical Integration and Its AlternativesThis chapter examines why vertical integration differs across industries across firms within the same industry and across different transactions within the same firmThe first part of this chapter assesses the merits of vertical integration as a function of the industry firm and transactions characteristicsIt then presents evidence on vertical integration from studies of a number of specific industries including automobiles aerospace electric utilities and electronic components industry The next section examines whether there might be other factors apart from those discussed in Chapter 5 that might drive a firms decision to vertically integrateThis chapter focuses on two alternative classes of explanationOne is theory offered by Sanford Grossman Oliver Hart and John Moore that stresses the role of asset management and its effect on investments in relationship specific assets as a key determinant of vertical integrationThe second theory analyzes market imperfections moti
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