Vertical Integration

Paul Joskow

Chapter 13 in Handbook of New Institutional Economics, 2008, pp 319-348 from Springer

Abstract: Understanding the factors that determine which types of transactions are mediated through markets and which within hierarchical organizations called firms has been an important subject of theoretical and empirical work in microeconomics generally and central to work in New Institutional Economics (NIE) in particular for at least the last 25 years. This essay reviews research that examines the choice between governance of vertical relationships involving suppliers of intermediate goods and services (“upstream”) and the purchasers of those goods and services (“downstream”) through some form of market-based contractual arrangement versus governance within an organization through vertical integration. My primary emphasis is on the transaction cost economics (TCE) framework for understanding the choice of governance arrangements, though I will briefly discuss several other theories of vertical integration as well.

Keywords: Vertical Integration; Transaction Cost Economics; Governance Arrangement; Contractual Arrangement; Post Bargaining (search for similar items in EconPapers)
Date: 2008
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DOI: 10.1007/978-3-540-69305-5_14

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