Vertical organization of production and firm growth

Fabio Pieri

No 2016/01, DEM Working Papers from Department of Economics and Management

Abstract: This paper empirically explores if different vertical organizational forms (i.e. vertical integration versus dis-integration) give rise to unlike growth ''behaviors'' within the same industry. An econometric analysis is conducted in a sample of around 500 Italian machine tool (MT) builders for the period 1998-2007, implementing instrumental variables to control for the endogeneity of the organizational form in the relation. Ceteris paribus, vertically integrated firms result to be characterized by a less dispersed distribution of growth rates than their dis-integrated counterparts. Several concurring factors, such as adjustment costs, organizational slacks and a better management of fluctuations in the markets of intermediate and final products, may explain the more ÒstableÓ growth profile of vertically integrated firms. By means of analyzing how different organizational forms map into the distribution of output growth rates, this work provides insight into the firm dynamics in a mature industry in which both vertically integrated and dis-integrated firms coexist.

Keywords: Vertical integration; Firm growth; Variance-vertical integration scaling relation; Instrumental variables; Quantile regression; Italian machine tool industry (search for similar items in EconPapers)
JEL-codes: D22 L23 L24 L26 L64 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-bec, nep-com, nep-cse, nep-ind and nep-sbm
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Journal Article: Vertical organization of production and firm growth (2018)
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