Backward versus forward integration of firms in global value chains

Peter Egger, Katharina Erhardt and Gerard Masllorens

European Economic Review, 2023, vol. 153, issue C

Abstract: This paper seeks to understand the forces determining the pattern of asset ownership in global value chains. We augment a standard model of vertical integration rooted in the property-rights theory to account for fixed integration costs and derive four channels of influence for the cross-country and cross-sector pattern of asset ownership: the relative investment intensity of sectors and countries; the relative density of markets; the relative reliance on and importance of supplying and producing country-sectors; and the relative importance of fixed integration costs. We confirm the relevance of these determinants for the observed pattern of asset ownership in a large panel of worldwide directed ownership linkages.

Keywords: Firm integration; Global value chains; Investment (search for similar items in EconPapers)
JEL-codes: L14 L22 L23 L24 (search for similar items in EconPapers)
Date: 2023
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Working Paper: Backward Versus Forward Integration of Firms in Global Value Chains (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:153:y:2023:i:c:s0014292123000302

DOI: 10.1016/j.euroecorev.2023.104401

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