| By: |
;
Daron Acemoglu;
Philippe Aghion (Institute for Fiscal Studies and Harvard University);
Rachel Griffith (Institute for Fiscal Studies);
Fabrizio Zillibotti (Institute for Fiscal Studies) |
| Abstract: |
This paper investigates the determinants of vertical integration using data
from the UK manufacturing sector. We find that the relationship between a
downstream (producer) industry and an upstream (supplier) industry us more
likely to be vertically integrated when the producing industry is more
technology intensive and the supplying industry is less technology intensive.
Moreover, both of these effects are stronger when the supplying industry
accounts for a large fraction of the producer\\\'s costs. These results are
generally robust and hold with alternative measures of technology intensity,
with alternative estimation straegies, and with or without contraolling for a
number of firm and industry-level characteristics. They are consistent with
the incomplete contract theories of the firm that emphasize both the potential
costs and benefits of vertical integration in terms of investment incentives. |
| Keywords: |
holdup, incomplete contracts, internal organisation fo the firm, investment, R&D, technology, vertical integration |
| JEL: |
L22 L23 L24 L60 |
| Date: |
2004–12 |
| URL: |
http://d.repec.org/n?u=RePEc:ifs:ifsewp:04/34&r=ind |