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Vertical Integration (vertical + integration)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	80%
Humanities and Social Sciences	20%

Selected Abstracts

STRATEGIC VERTICAL INTEGRATION WITHOUT FORECLOSURE,

THE JOURNAL OF INDUSTRIAL ECONOMICS, Issue 2 2008
E. AVENEL
Merger waves; vertical integration; vertical foreclosure We determine the endogenous degree of vertical integration in a model of successive oligopoly that captures both efficiency gains and strategic effects. Foreclosure effects are purposely left aside. The profitability of integration originates in the greater ability of integrated firms to adopt a specific type of technologies. We show that vertical merger waves can stop by themselves before integration is complete because of strategic substitutability in vertical integration. This is in contrast to the strategic complementarity result in McLaren [2000] that leads to either complete integration or complete separation. [source]

Market Liberalisation, Vertical Integration and Price Behaviour in Tanzania's Coffee Auction

DEVELOPMENT POLICY REVIEW, Issue 2 2001
Anna A. Temu
Whether market liberalisation can promote agricultural development in Africa depends on how well existing institutions can facilitate trade by private agents. This article assesses the performance of the Tanzania coffee marketing system after liberalisation and the emergence of private, vertically integrated exporters (VIEs). Increasing producer prices, declining marketing margins, and the continued provision of a useful auction for coffee that is delivered by traders who are not VIEs all suggest a degree of success for liberalisation. The presence of VIEs seems to have provided investment to reduce marketing costs, whilst a sufficient number of competing firms has limited non-competitive behaviour in the market for coffee that is traded at the auction by non-VIEs. [source]

Foreign Investment, Vertical Integration and Local Equity Requirements

ECONOMICA, Issue 284 2004
Avik Chakrabarti
The paper presents a spatial model in which a foreign firm and local government behave strategically in setting a local equity requirement (LER). Contrary to simple intuition, larger equity requirements may increase economic efficiency, but this conclusion is highly sensitive to the vertical structure of the foreign firm. When the foreign firm has monopoly power in both foreign (upstream) and domestic (downstream) markets, the optimal equity requirement is zero. Surprisingly, the introduction of domestic competition upstream causes the government to adopt a LER which lowers economic efficiency. [source]

Randal Heeb Innovation and Vertical Integration in Complementary Markets

JOURNAL OF ECONOMICS & MANAGEMENT STRATEGY, Issue 3 2003
Randal Heeb
This paper studies vertical integration by an essential-good monopolist into complementary markets. Unlike previous studies of complementary products, consumers are allowed to purchase some components of a complementary basket, but not others. Two different pricing strategies by the integrated firm may emerge. In mass-market equilibria, the price of the complement under integration is zero and it is given away with the essential good. Niche-market equilibria have more conventional pricing. This dichotomy is consistent with consumer software pricing. Integration enhances consumer and total surplus, unless it leads to exit by the higher-quality rival, in which case welfare is reduced. Exit is most likely when it is least damaging to consumer welfare. Integration reduces innovation by the rival firm. The effect on innovation by the integrated firm is ambiguous, but numerical computation of an extended model indicates that integration increases the innovation of the integrated firm and enhances welfare. [source]

Vertical Foreclosure, Technological Choice, and Entry on the Intermediate Market

JOURNAL OF ECONOMICS & MANAGEMENT STRATEGY, Issue 3 2000
Eric Avenel
This paper analyzes the profitability of vertical integration for an upstream monopoly facing a potential competitor. We show that it depends on the technology used by the firm when it integrates. We distinguish two types of technologies: standard technologies, used by nonintegrated firms, and nonstandard technologies, reserved for integrated firms and implying the complete foreclosure of nonintegrated firms. Vertical integration with the adoption of a nonstandard technology dominates vertical integration with the adoption of a standard technology and is profitable, as long as the degree of competition in the downstream industry is sufficiently low. [source]

Vertical Foreclosure, Technological Choice, and Entry on the Intermediate Market

JOURNAL OF ECONOMICS & MANAGEMENT STRATEGY, Issue 2 2000
Eric Avenel
This paper analyzes the profitability of vertical integration for an upstream monopoly facing a potential competitor. We show that it depends on the technology used by the firm when it integrates. We distinguish two types of technologies: standard technologies, used by nonintegrated firms, and nonstandard technologies, reserved for integrated firms and implying the complete foreclosure of nonintegrated firms. Vertical integration with the adoption of a nonstandard technology dominates vertical integration with the adoption of a standard technology and is profitable, as long as the degree of competition in the downstream industry is sufficiently low. [source]

Vertical integration in the wine industry: a transaction costs analysis on the Rioja DOCa

AGRIBUSINESS : AN INTERNATIONAL JOURNAL, Issue 2 2009
Marta Fernández-Olmos
The authors study the determinants of make or buy decisions for grapes made by wineries belonging to the Rioja Qualified Designation of Origin (DOCa). In particular, they analyze the relationship between product quality and vertical integration. Although there is a long tradition in transaction cost theory of analyzing the determinants of make or buy decisions in manufacturing, surprisingly few empirical studies have been conducted in the agriculture and food and beverage industry. Likewise, although quality is a key competitive variable in many food sectors, only a few studies have analyzed quality in their models. The authors find that transaction costs and product quality provide a useful explanation of vertical integration in the wine industry in the Rioja DOCa. Wineries that produce high-quality wines are more likely to integrate vertically than those producing low-quality wines. They also find that the size of the winery significantly affects make or buy choices. Implications are explored for managers facing a governance mode choice. [EconLit Classifications: L220, Q130]. © 2009 Wiley Periodicals, Inc. [source]

Vertical integration and cost behavior in poultry industry in Ogun and Oyo States of Nigeria

AGRIBUSINESS : AN INTERNATIONAL JOURNAL, Issue 1 2009
Olasunkanmi M. Bamiro
In this article, the influence of vertical integration on cost behavior in poultry farming in southwestern Nigeria is examined. The study was based on primary data obtained in cross-section survey of 211 randomly selected poultry farms in the study area. An average farmer in the sample was 44 years old; 85% were males and 72% had tertiary education. An average poultry farm in the sample had 4,342 birds, about half of which were laying birds. A set of cost and revenue share equations estimated by Zellner's seemingly unrelated regression (SUR) method revealed that vertical integration (measured in proxy by value-added sales ratio) is feed and veterinary service using, labor saving, and output augmenting. However, the scale effect of vertical integration was found to be higher in layers production than what obtains in broilers and cock/cockerel productions. [EconLit citations: Q120, D240, R340]. © 2009 Wiley Periodicals, Inc. [source]

Vertical integration and trade policy: The case of sugar

AGRIBUSINESS : AN INTERNATIONAL JOURNAL, Issue 1 2002
Charles B. Moss
The degree of vertical integration in the U.S. sugar industry between raw-sugar processing and sugar refining cannot be explained using theories of vertical integration based only on transaction costs. We graphically decompose the economic rents accruing to each level participant in the marketing channel. Different strategies of several major sugar producing, processing, and refining entities with regard to sugar quota policy are explored. Firms that are integrated from sugar production through to sugar marketing are less impacted by freer trade than are those that concentrate solely on production. We contrast the sugarcane industry in Florida and Louisiana with sugar beet production and processing in the northern plains. The sugar industry in Florida, because of the high degree of vertical integration, is much more capable of dealing with expanded sugar imports than either sugarcane producers in Louisiana or sugar beet growers in the northern plains where integration is not as pronounced. [Econ-Lit citations: Q18, Q11] © 2002 Wiley Periodicals, Inc. [source]

Investment risk allocation in decentralised electricity markets.

OPEC ENERGY REVIEW, Issue 2 2008
The need of long-term contracts, vertical integration
None of the far-reaching experiments in electricity industry liberalisation was able to ensure the timely and optimal capacity mix development. The theoretical market model features market failures due to the specific volatility of prices, and the difficulty of creating complete markets for hedging. In this paper, we focused on a specific failure, i.e. the impossibility of allocating the various risks borne by the producer onto suppliers and consumers in order to allow capacity development. Promotion of short-term competition by mandating vertical de-integration tends to distort investments in generation by impeding efficient risk allocation. Following Joskow's (2006) line, we developed an empirical analysis of how to secure investments in generation through vertical arrangements between decentralised generators and large purchasers, suppliers or consumers. Empirical observations as risk analysis shows that adopting such arrangements may prove necessary. Various types of long-term contracts between generators and suppliers (fixed-quantity and fixed-price contract, indexed price contract, tolling contract, financial option) appear to offer effective solutions for risk allocation. Vertical integration appears to be another effective way to allocate risk. But it remains an important complementary condition to efficient risk allocation, i.e. that retail competition is sticky or legally limited in order to have a large part of risks borne by consumers on the different market segments. [source]

Ownership, incentives, and the hold-up problem

THE RAND JOURNAL OF ECONOMICS, Issue 2 2006
Tim Baldenius
Vertical integration is often proposed as a way to resolve hold-up problems. This ignores the empirical fact that division managers tend to maximize divisional (not firmwide) profit when investing. I develop a model with asymmetric information at the bargaining stage and investment returns taking the form of cash and "empire benefits." Owners of a vertically integrated firm will then provide division managers with low-powered incentives to induce them to bargain more cooperatively, resulting in higher investments and overall profit as compared with nonintegration. Vertical integration therefore mitigates hold-up problems even without profit sharing. [source]

A European methodology for sustainable development strategy reviews

ENVIRONMENTAL POLICY AND GOVERNANCE, Issue 2 2010
Joachim H. Spangenberg
Abstract In 2005 the EU Environment Directorate initiated the production of a guidebook for peer reviews of national sustainable development strategies (NSDSs), which was published in 2006. Its objective is to support EU member states planning to evaluate their respective NSDS, supporting and stimulating all potential participants. It describes how to initiate, start, lead and conclude an evaluation process, and suggests, based on European experiences, a spectrum of methods available for this purpose. During a Commission-sponsored trial period, 2006/2007, the Netherlands was the only country to make use of this offer. However, the renewed EU Sustainable Development Strategy (EUSDS) calls for regular (peer) reviews of NSDS. Using this specific review instrument is recommended as part of a mutual learning exercise, which might stimulate a self-organized convergence of NSDSs, and better vertical integration, without establishing new competences and mechanisms on the EU level. Two new elements are suggested, a simple ,pressure,policy matrix' (PPM), supporting comprehensiveness control, and the possibility of patchwork evaluations, based on the systematique of the matrix. Copyright © 2010 John Wiley & Sons, Ltd and ERP Environment. [source]

The Slovak national SD strategy process: a mix of achievements and shortcomings

ENVIRONMENTAL POLICY AND GOVERNANCE, Issue 6 2007
Michal Sedla
Abstract National strategies for sustainable development are gaining increasing recognition as an instrument to reconcile needs of development and environmental protection by improving policy-making procedures. The paper assesses the Slovak sustainable development strategy in the context of two key documents, the National Strategy for Sustainable Development of the Slovak Republic (MESR, 2001a) and the Action Plan for Sustainable Development of the Slovak Republic for 2005,2010 (OGSR, 2005). Focus is mainly placed on horizontal policy integration, but institutional arrangements and mechanisms for implementation, monitoring and review, stakeholder participation and vertical integration are also assessed. Based on the results of a series of interviews with ministerial planners and utilizing the example of the Working Group for Environmental Education, the paper identifies barriers to horizontal policy integration. The main conclusion is that improvement of mechanisms for horizontal policy integration is offset by recession in other areas, including public participation. Copyright © 2007 John Wiley & Sons, Ltd and ERP Environment. [source]

The German sustainable development strategy: facing policy, management and political strategy assessments

ENVIRONMENTAL POLICY AND GOVERNANCE, Issue 3 2007
Ralf Tils
Abstract The Germans' conviction of being an international frontrunner in environmental policy stands in contrast to the unwillingness of the German national governments of the 1990s to undertake a commitment for a nationwide sustainable development strategy. Using five core strategy categories, namely horizontal and vertical integration, participation, implementation mechanism, monitoring and evaluation, this article provides an overview of the German sustainable development strategy preparation and implementation process. While the strategy is an ambitious concept, it also exhibits important shortcomings when viewed with different analytical perspectives such as policy, management and political strategy. Only with all of these perspectives combined can we arrive at specific conclusions about the assessment of the strategy process and make the essential characteristics of political strategy apparent. Copyright © 2007 John Wiley & Sons, Ltd and ERP Environment. [source]

UK tour operator strategies: causes and consequences,

INTERNATIONAL JOURNAL OF TOURISM RESEARCH, Issue 5 2001
Mary Klemm
This paper is an investigation of the competitive strategies of British tour operators and their impact on the image and quality of tourist destinations. The strategies considered are the vertical integration of tour operators with travel retailers and airlines, pricing and contracting systems in the resort, and developments in market segmentation. The authors also consider the rationale, development and impact of tour operator branding, a strategy that has accelerated the trend towards standardised holiday products. The study concludes by outlining policies to counteract the negative effects of tour operator strategies and work towards a more fruitful partnership between mass market tour operators and tourist destinations. Copyright © 2001 John Wiley & Sons, Ltd. [source]

Global Restructuring and Liberalization: Côte d 'Ivoire and the End of the International Cocoa Market?

JOURNAL OF AGRARIAN CHANGE, Issue 2 2002
Bruno Losch
The restructuring of the world cocoa market has concluded with the liberalization of the sector in the world's leading producing country, Côte d'Ivoire, clearing the way for domination by an oligopoly of global companies. This paper describes how Côte d'Ivoire's share of world production created an illusion but not the reality of market power. In the 1990s, in the wake of failed attempts to influence the world market, the Ivorian cocoa sector experienced a series of upheavals that were both pivotal to broader changes in the global market and a refiection of them. The converging strategies of new Ivorianfirms and of the major global grinding companies resulted in increased vertical integration in Côte d'Ivoire, exemplified in the development of ,origin grinding '. Later, financial difficulties encountered by Ivorian firms led to global companies taking control. Amongst the results of these changes are a decline in the role of traders, a redefinition of the relationship between grinders and chocolate manufacturers, and a standardization of cocoa quality around an average ,bulk' level. This signals the end of ,the producing countries' and of the global market. [source]

Vertical Networks, Integration, and Connectivity

JOURNAL OF ECONOMICS & MANAGEMENT STRATEGY, Issue 2 2009
Pinar Do
This paper studies competition in a network industry with a stylized two layered network structure, and examines: (i) price and connectivity incentives of the upstream networks, and (ii) incentives for vertical integration between an upstream network provider and a downstream firm. The main result of this paper is that vertical integration occurs only if the initial installed-base difference between the upstream networks is sufficiently small, and in that case, industry is configured with two vertically integrated networks, which yields highest incentives to invest in quality of interconnection. When the installed-base difference is sufficiently large, there is no integration in the industry, and neither of the firms have an incentive to invest in quality of interconnection. An industry configuration in which only the large network integrates and excludes (or raises cost of) its downstream rival does not appear as an equilibrium outcome: in the presence of a large asymmetry between the networks, when quality of interconnection is a strategic variable, the large network can exercise a substantial market power without vertical integration. Therefore, a vertically separated industry structure does not necessarily yield procompetitive outcomes. [source]

Randal Heeb Innovation and Vertical Integration in Complementary Markets

Product Differentiation and Upstream-Downstream Relations

JOURNAL OF ECONOMICS & MANAGEMENT STRATEGY, Issue 2 2001
Lynne Pepall
This paper examines the relationship between a differentiated downstream market and a specialized upstream market. We analyze three different types of vertical relation between the upstream and downstream sectors when the upstream market supplies specialized and complementary inputs to a downstream product-differentiated market. The first is the benchmark case of decentralized markets, the second is a network of alliances among upstream suppliers, and the third is partial vertical integration. We identify the perfect equilibrium for a symmetric model in each case and show that there is no simple relationship between the degree of connection between upstream and downstream firms and profitability. The key factor affecting prices and the relative profitability of the different market organizations is the degree of product differentiation among the downstream firms, because it affects the intensity of competition among upstream suppliers. We show that vertical foreclosure is not an equilibrium strategy. [source]

Vertical Foreclosure, Technological Choice, and Entry on the Intermediate Market

Vertical integration in the wine industry: a transaction costs analysis on the Rioja DOCa

Vertical integration and cost behavior in poultry industry in Ogun and Oyo States of Nigeria

Vertical integration and trade policy: The case of sugar

Pesticide residues and vertical integration in Florida strawberries and tomatoes

AGRIBUSINESS : AN INTERNATIONAL JOURNAL, Issue 2 2001
Richard L. Kilmer
Government regulations and consumer concern about pesticide residues in food may increase the costs of production and marketing for producers and processors associated with food safety risks. Vertical coordination is an economic response for mitigating the costs associated with uncertain pesticide residue levels. Data from a survey of Florida strawberry and tomato growers were used to test the hypothesis that vertical integration is associated with a lower mean and variance of pesticide residues. The results confirm a significant negative relationship between vertical integration and fungicide and insecticide residues in Florida strawberries and insecticides in Florida tomatoes. However, fungicides in tomatoes had the opposite effect. [Econ-Lit citations: L220, L660] © 2001 John Wiley & Sons, Inc. [source]

The Use of Intermediate Sourcing Strategies

JOURNAL OF SUPPLY CHAIN MANAGEMENT, Issue 1 2001
Kirk C. Heriot
SUMMARY Much of the existing literature discusses vertical integration and competitive spot bidding as sourcing strategy choices, but often neglects intermediate sourcing strategies, such as taper integration and long-term supplier relationships. This exploratory study examines the extent to which firms use intermediate sourcing strategies, as opposed to the polar strategies, and attempts to improve our understanding of the sourcing choices available to manufacturing firms. Results from a sample of 209 plant managers indicate that firms use taper integration and long-term supplier relationships more frequently than vertical integration and competitive spot bidding. Further, the choice of a sourcing strategy was found to be dependent on the industry. [source]

Improving performance through vertical disintegration: evidence from UK manufacturing firms

MANAGERIAL AND DECISION ECONOMICS, Issue 5 2009
Panos DesyllasArticle first published online: 24 NOV 200
Unlike previous work on the vertical integration,performance relationship, we investigate the performance consequences of vertical disintegration. We offer a theoretical justification for the disintegration decision and we condition the disintegration effect on performance on the initial degree of firm integration, the timing and the direction of disintegration. Using a sample of UK manufacturing firms and controlling for disintegration endogeneity, we find that disintegration eventually results in improved operating performance, particularly when disintegration occurs as a reaction to poor performance and in cases of forward between-sector disintegration. However, being highly integrated does not guarantee gains from disintegration. The implications of these findings are discussed. Copyright © 2008 John Wiley & Sons, Ltd. [source]

STRATEGIC VERTICAL INTEGRATION WITHOUT FORECLOSURE,

The Rise and Decline of an International Zinc and Lead Cartel, 1945,75

AUSTRALIAN ECONOMIC HISTORY REVIEW, Issue 3 2000
Kosmas Tsokhas
From the late 1940s to the early 1970s major firms in the international zinc and lead industries organized cartels to stabilize the prices of the metals at above market levels. The attempts of the Zinc Producers Group and the Lead Producers Group to secure above-market-level prices met with limited success because of divisions within each cartel over strategy, the large number of producers and source countries, and the lack of international market power and comprehensive vertical integration. Limited barriers to entry, external competition, and the impact of anti-monopoly and restrictive trade practices legislation further weakened the cartels. [source]