Customer satisfaction and vertical integration

Marina Murdock, Thanh Ngo and Nivine Richie

The North American Journal of Economics and Finance, 2025, vol. 80, issue C

Abstract: We explore the relationship between vertical integration of the firm and customer satisfaction, contributing to the emerging literature on the interaction of finance and marketing. Using the American Customer Satisfaction Index (ACSI) to measure customer satisfaction from 1995 to 2021 and the vertical integration scores gathered from Frésard, Hoberg, & Phillips (2020), we find that customer satisfaction is higher for vertically integrated firms. We examine two channels—trade credit and inventory management—through which vertical integration may affect customer satisfaction. We find that increased trade credit is associated with higher levels of customer satisfaction, and this relationship is intensified for firms that are more highly integrated along the supply chain. Additionally, customer satisfaction is inversely related to inventory turnover, and this inverse relationship is mitigated by increased relatedness along the integrated supply chain. The findings suggest that control over various stages of production and distribution enables firms to better anticipate and manage inventory levels, reducing the risk of stockouts and overstocking.

Keywords: Corporate finance; Mergers and acquisitions; Transaction cost economics; Firm Organization and Market Structure; Firm performance: size, diversification, and scope; Marketing – General (search for similar items in EconPapers)
JEL-codes: G30 G34 L14 L22 L25 M30 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:80:y:2025:i:c:s106294082500138x

DOI: 10.1016/j.najef.2025.102498

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