Vertical Strategies and Market Structure: A Systematic Risk Analysis

Sayan Chatterjee, Michael Lubatkin and Timothy Schoenecker
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Sayan Chatterjee: The Weatherhead School of Management, Department of Marketing and Policy, Case Western Reserve University, Cleveland, Ohio 44106
Michael Lubatkin: 368 Fairfield Road/Box U-41B, University of Connecticut, Storrs, Connecticut 06269-2041 and Groupe ESC Lyon, Lyon, France
Timothy Schoenecker: Krannert Graduate School of Management, Purdue University, West Lafayette, Indiana 47907

Organization Science, 1992, vol. 3, issue 1, 138-156

Abstract: This study examines the implications of vertical mergers on the risk characteristic of the merging firms. Specifically, the study focuses on three structural characteristics of the acquiring and acquired firm's market to explain the change in the systematic or environmental risk of the acquiring firm. These structural factors are the level of competition in the acquiring firm's industry, the level of competition in the acquired firm's industry, and the growth rate of the acquiring firm's industry. The findings suggest that vertical mergers are effective at reducing systematic risk particularly when the acquiring firm competes in a concentrated market. Further, this result appears to be stable across life cycle stages.

Keywords: integration; vertical mergers; systematic risk (search for similar items in EconPapers)
Date: 1992
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ororsc:v:3:y:1992:i:1:p:138-156

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