Vertical Foreclosure in the Global Production Network

Johannes Boehm and Jan Sonntag
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Jan Sonntag: Sciences Po Paris

No 677, 2018 Meeting Papers from Society for Economic Dynamics

Abstract: This paper studies the prevalence of market foreclosure using a novel dataset on U.S. and international buyer-seller relationships, and across a large range of industries. We find that relationships are more likely to break when suppliers vertically integrate with one of the buyers' competitors than when they vertically integrate with an unrelated firm. We establish causality using the prevalence of past vertical integration among related parties as an instrument. Foreclosure is more prevalent when suppliers have more market power. Furthermore, we find a substantial drop in performance among foreclosed firms.

Date: 2018
New Economics Papers: this item is included in nep-com, nep-net and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed018:677

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