Vertical Integration in High-Transaction Cost Sectors: The Case of the Bulgarian Pharmaceutical Industry

Tamara Todorova ()

EconStor Open Access Articles and Book Chapters, 2010, vol. 1, issue 2 (Winter), 127-138

Abstract: Economic theory provides various explanations for vertical integration but transaction costs seem to be a major determinant of backward, forward and lateral integration. The paper studies integration trends in the newly emerging Bulgarian pharmaceutical sector, seeking transaction cost explanations to the forward integration taking place in it. We hypothesize that asset specificity, above all, determines many of the organizational transformations and adaptations Bulgarian pharmaceutical companies are undergoing. Having special attributes, their products and assets seem to favor a larger size of the companies. Furthermore, as a low-trust, high-transaction cost economy, the Bulgarian economy dictates that a larger scale of operations be internalised within firms rather than carried out by the market.

Keywords: vertical integration; transaction costs; asset specificity; distribution (search for similar items in EconPapers)
JEL-codes: D23 D86 I11 L42 (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:espost:172498

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