Contracting institutions and vertical integration: Evidence from China’s manufacturing firms

Julan Du, Yi Lu and Zhigang Tao

Journal of Comparative Economics, 2012, vol. 40, issue 1, 89-107

Abstract: The existing studies on vertical integration focus on factors at the transaction parties’ level, such as asset specificity and contractual incompleteness. What is overlooked is the quality of the underlying institutions, in particular, contracting institutions. In this paper, using a World Bank data set of manufacturing firms in China, we find that poorer contracting institutions cause firms to be more vertically integrated. Our results are robust to various checks, especially the inclusion of the quality of financial institutions.

Keywords: Contracting institutions; Vertical integration; Legal origins (search for similar items in EconPapers)
JEL-codes: D23 K12 L23 P26 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:40:y:2012:i:1:p:89-107

DOI: 10.1016/j.jce.2011.10.002

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