Vertical Integration and Technology: Theory and Evidence

Daron Acemoglu, Philippe Aghion, Rachel Griffith and Fabrizio Zilibotti

Journal of the European Economic Association, 2010, vol. 8, issue 5, 989-1033

Abstract: We study the determinants of vertical integration. We first derive a number of predictions regarding the relationship between technology intensity and vertical integration from a simple incomplete contracts model. Then, we investigate these predictions using plant-level data for the UK manufacturing sector. Most importantly, and consistent with the theoretical predictions, we find that the technology intensity of downstream (producer) industries is positively correlated with the likelihood of integration whereas the intensity of upstream (supplier) industries is negatively correlated with it. Also consistent with theory, both correlations 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 strategies, and with or without controlling for a number of firm- and industry-level characteristics. (JEL: L22, L23, L24, L60) (c) 2010 by the European Economic Association.

JEL-codes: L22 L23 L24 L60 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (138)

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Related works:
Working Paper: Vertical Integration and Technology: Theory and Evidence (2010)
Working Paper: Vertical Integration and Technology: Theory and Evidence (2007)
Working Paper: Vertical Integration and Technology: Theory and Evidence (2005)
Working Paper: Vertical integration and technology: theory and evidence (2004)
Working Paper: Vertical Integration and Technology: Theory and Evidence (2004)
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