Why Do Firms Own Production Chains?

Enghin Atalay, Ali Hortacsu and Chad Syverson

No 18020, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We use broad-based yet detailed data from the economy's goods-producing sectors to investigate firms' ownership of production chains. It does not appear that vertical ownership is primarily used to facilitate transfers of goods along the production chain, as is often presumed: Roughly one-half of upstream plants report no shipments to their firms' downstream units. We propose an alternative explanation for vertical ownership, namely that it promotes efficient intra-firm transfers of intangible inputs. We show evidence consistent with this hypothesis, including the fact that upon a change of ownership, an acquired plant begins to resemble the acquiring firm along multiple dimensions.

JEL-codes: L0 L23 L24 (search for similar items in EconPapers)
Date: 2012-04
New Economics Papers: this item is included in nep-bec and nep-com
Note: IO PR
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Citations: View citations in EconPapers (35)

Published as Atalay, Enghin, Ali Hortaçsu, and Chad Syverson. 2014. "Vertical Integration and Input Flows." American Economic Review, 104(4): 1120-48. DOI: 10.1257/aer.104.4.1120

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Related works:
Working Paper: Why Do Firms Own Production Chains? (2009)
Working Paper: Why Do Firms Own Production Chains? (2009)
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