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Vertical Integration and Input Flows

Enghin Atalay (), Ali Horta?su and Chad Syverson

American Economic Review, 2014, vol. 104, issue 4, 1120-48

Abstract: We use broad-based yet detailed data from the economy's goods-producing sectors to investigate firms' ownership of production chains. It does not appear that vertical ownership is primarily used to facilitate transfers of goods along the production chain, as is often presumed: roughly one-half of upstream establishments report no shipments to downstream establishments within the same firm. We propose an alternative explanation for vertical ownership, namely that it promotes efficient intrafirm transfers of intangible inputs. We show evidence consistent with this hypothesis, including the fact that, after a change of ownership, an acquired establishment begins to resemble the acquiring firm along multiple dimensions.

JEL-codes: G32 G34 L14 L22 L60 M11 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/aer.104.4.1120
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Handle: RePEc:aea:aecrev:v:104:y:2014:i:4:p:1120-48