IDEAS home Printed from https://ideas.repec.org/a/bla/jemstr/v26y2017i2p403-428.html
   My bibliography  Save this article

Vertical Integration and Firm Productivity

Author

Listed:
  • Hongyi Li
  • Yi Lu
  • Zhigang Tao

Abstract

This paper uses three cross‐industry datasets from China and other developing countries to study the effect of vertical integration on firm productivity. Our findings suggest that vertical integration has a negative impact on productivity, in contrast to recent studies based on U.S. firms. We argue that in settings with poor corporate governance, vertical integration reduces firm productivity because it enables inefficient rent‐seeking by insiders.

Suggested Citation

  • Hongyi Li & Yi Lu & Zhigang Tao, 2017. "Vertical Integration and Firm Productivity," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 26(2), pages 403-428, June.
    • Handle: RePEc:bla:jemstr:v:26:y:2017:i:2:p:403-428
    DOI: 10.1111/jems.12191
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/jems.12191
    Download Restriction: no
    File URL: https://libkey.io/10.1111/jems.12191?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Ali Hortaçsu & Chad Syverson, 2007. "Cementing Relationships: Vertical Integration, Foreclosure, Productivity, and Prices," Journal of Political Economy, University of Chicago Press, vol. 115(2), pages 250-301.
    2. Tasneem Chipty, 2001. "Vertical Integration, Market Foreclosure, and Consumer Welfare in the Cable Television Industry," American Economic Review, American Economic Association, vol. 91(3), pages 428-453, June.
    3. Gibbons, Robert, 2005. "Four forma(lizable) theories of the firm?," Journal of Economic Behavior & Organization, Elsevier, vol. 58(2), pages 200-245, October.
    4. Bai, Chong-En & Du, Yingjuan & Tao, Zhigang & Tong, Sarah Y., 2004. "Local protectionism and regional specialization: evidence from China's industries," Journal of International Economics, Elsevier, vol. 63(2), pages 397-417, July.
    5. Ricard Gil, 2015. "Does Vertical Integration Decrease Prices? Evidence from the Paramount Antitrust Case of 1948," American Economic Journal: Economic Policy, American Economic Association, vol. 7(2), pages 162-191, May.
    6. Silke J. Forbes & Mara Lederman, 2010. "Does vertical integration affect firm performance? Evidence from the airline industry," RAND Journal of Economics, RAND Corporation, vol. 41(4), pages 765-790, December.
    7. Alwyn Young, 2000. "The Razor's Edge: Distortions and Incremental Reform in the People's Republic of China," NBER Working Papers 7828, National Bureau of Economic Research, Inc.
    8. Levin, Richard C., 1981. "Vertical integration and profitability in the oil industry," Journal of Economic Behavior & Organization, Elsevier, vol. 2(3), pages 215-235, September.
    9. Williamson, Oliver E, 1983. "Credible Commitments: Using Hostages to Support Exchange," American Economic Review, American Economic Association, vol. 73(4), pages 519-540, September.
    10. Ricard Gil, 2009. "Revenue Sharing Distortions and Vertical Integration in the Movie Industry," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 25(2), pages 579-610, October.
    11. Guy David & Evan Rawley & Daniel Polsky, 2013. "Integration and Task Allocation: Evidence from Patient Care," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(3), pages 617-639, September.
    12. Alwyn Young, 2000. "The Razor's Edge: Distortions and Incremental Reform in the People's Republic of China," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(4), pages 1091-1135.
    13. Masten, Scott E, 1984. "The Organization of Production: Evidence from the Aerospace Industry," Journal of Law and Economics, University of Chicago Press, vol. 27(2), pages 403-417, October.
    14. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Loren Brandt & Feitao Jiang & Yao Luo & Yingjun Su, 2022. "Ownership and Productivity in Vertically Integrated Firms: Evidence from the Chinese Steel Industry," The Review of Economics and Statistics, MIT Press, vol. 104(1), pages 101-115, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Francine Lafontaine & Margaret Slade, 2007. "Vertical Integration and Firm Boundaries: The Evidence," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 629-685, September.
    2. In Kyung Kim & Vladyslav Nora, 2020. "Does vertical integration enhance non-price efficiency? Evidence from the movie theater industry," Review of Economic Design, Springer;Society for Economic Design, vol. 24(3), pages 143-170, December.
    3. Marissa Beck & Fiona Scott Morton, 2021. "Evaluating the Evidence on Vertical Mergers," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 59(2), pages 273-302, September.
    4. Christopher Hansman & Jonas Hjort & Gianmarco León-Ciliotta & Matthieu Teachout, 2020. "Vertical Integration, Supplier Behavior, and Quality Upgrading among Exporters," Journal of Political Economy, University of Chicago Press, vol. 128(9), pages 3570-3625.
    5. Timothy Bresnahan & Jonathan Levin, 2012. "Vertical Integration and Market Structure [The Handbook of Organizational Economics]," Introductory Chapters,, Princeton University Press.
    6. In Kyung Kim & Vladyslav Nora, 2017. "Does Vertical Integration Enhance Non-Price Efficiency? Evidence from the Movie Theater Industry," Working Papers 1701, Nazarbayev University, Department of Economics, revised Feb 2018.
    7. Macchiavello, Rocco & Miquel-Florensa, Josepa, 2017. "Vertical Integration and Relational Contracts: Evidence from the Costa Rica Coffee Chain," CEPR Discussion Papers 11874, C.E.P.R. Discussion Papers.
    8. Li, Ben & Lu, Yi, 2009. "Geographic concentration and vertical disintegration: Evidence from China," Journal of Urban Economics, Elsevier, vol. 65(3), pages 294-304, May.
    9. Silke J. Forbes & Mara Lederman, 2010. "Does vertical integration affect firm performance? Evidence from the airline industry," RAND Journal of Economics, RAND Corporation, vol. 41(4), pages 765-790, December.
    10. Zheng LU & Xiang DENG, 2017. "Regional Specialization: New Methods Of Measurement And The Trends In China 1987-2007," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 17(2), pages 119-134.
    11. Qun Bao & Jiuli Huang & Yanling Wang, 2015. "Productivity and Firms’ Sales Destination: Chinese Characteristics," Review of International Economics, Wiley Blackwell, vol. 23(3), pages 620-637, August.
    12. Laura Alfaro & Nick Bloom & Paola Conconi & Harald Fadinger & Patrick Legros & Andrew F Newman & Raffaella Sadun & John Van Reenen, 2024. "Come Together: Firm Boundaries and Delegation," Journal of the European Economic Association, European Economic Association, vol. 22(1), pages 34-72.
    13. Lu, Jiangyong & Tao, Zhigang, 2009. "Trends and determinants of China's industrial agglomeration," Journal of Urban Economics, Elsevier, vol. 65(2), pages 167-180, March.
    14. He, Qing & Xue, Chang & Zhu, Chenqi, 2014. "Financial development and patterns of industrial specialization : Regional evidence from China," BOFIT Discussion Papers 12/2014, Bank of Finland, Institute for Economies in Transition.
    15. Li, Yifan & Miao, Zhuang & Wang, Junbo & Zhang, Yan, 2023. "The FDI liberalization and skill structure of labor market in China: The predicament of migrants," MPRA Paper 117923, University Library of Munich, Germany.
    16. Wei Tang & Geoffrey J.D. Hewings, 2017. "Do city–county mergers in China promote local economic development?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 25(3), pages 439-469, July.
    17. Herrmann-Pillath, Carsten & Libman, Alexander & Yu, Xiaofan, 2014. "Economic integration in China: Politics and culture," Journal of Comparative Economics, Elsevier, vol. 42(2), pages 470-492.
    18. repec:zbw:bofitp:2014_012 is not listed on IDEAS
    19. Long, Cheryl & Zhang, Xiaobo, 2012. "Patterns of China's industrialization: Concentration, specialization, and clustering," China Economic Review, Elsevier, vol. 23(3), pages 593-612.
    20. Amiti, Mary & Smarzynska Javorcik, Beata, 2008. "Trade costs and location of foreign firms in China," Journal of Development Economics, Elsevier, vol. 85(1-2), pages 129-149, February.
    21. Ge, Ying, 2009. "Globalization and Industry Agglomeration in China," World Development, Elsevier, vol. 37(3), pages 550-559, March.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jemstr:v:26:y:2017:i:2:p:403-428. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.kellogg.northwestern.edu/research/journals/JEMS/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.