Do Agglomeration and Technology Affect Vertical Integration? Evidence from Italian Business Groups

Giulio Cainelli and Donato Iacobucci ()

International Journal of the Economics of Business, 2009, vol. 16, issue 3, 305-322

Abstract: The aim of this paper is to analyse the role of technology and spatial agglomeration in decisions about vertical integration. It starts from the hypothesis that the business group, defined as a set of firms under common ownership and control, is the appropriate unit to delimit the firm's boundary. We use information drawn from input-output tables to detect the presence of positive inter-industry exchanges and whether or not activities in a group are vertically related. Accounting for endogeneity problems, we estimate Probit and Linear Probability models to investigate the role of technology and spatial agglomeration on vertical integration decisions empirically. Consistent with property rights theory, our results show that the technology intensity of acquirers matters for backward integration choices and, moreover, that agglomeration plays a role in vertical integration only when it operates jointly with technology.

Keywords: Business Groups; Spatial Agglomeration; Technology; Vertical Integration (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (8)

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DOI: 10.1080/13571510903227049

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