IDEAS home Printed from https://ideas.repec.org/a/bla/jomstd/v46y2009i2p269-307.html
   My bibliography  Save this article

Changing Vertical Integration Strategies under Pressure from Foreign Competition: The Case of US and German Multinationals

Author

Listed:
  • Thomas Hutzschenreuter
  • Florian Gröne

Abstract

This study contributes to the emerging body of research into the influence of foreign competition on firm scope. Industrial organization economics, the resource‐based view of the firm, and transaction cost economics consistently predict vertical de‐integration in the face of intensifying pressure from imports and foreign direct investment. We show this was the case for 407 US firms between 1987 and 2003. Results for a panel of 95 German firms reveal a similar reaction to pressure from an increase in imports, but show no reaction to increased exposure to incoming foreign direct investment during the same time frame.

Suggested Citation

  • Thomas Hutzschenreuter & Florian Gröne, 2009. "Changing Vertical Integration Strategies under Pressure from Foreign Competition: The Case of US and German Multinationals," Journal of Management Studies, Wiley Blackwell, vol. 46(2), pages 269-307, March.
    • Handle: RePEc:bla:jomstd:v:46:y:2009:i:2:p:269-307
    DOI: 10.1111/j.1467-6486.2008.00811.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1467-6486.2008.00811.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1467-6486.2008.00811.x?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. Gilles Chemla & Gilles Chemla, 2003. "Downstream Competition, Foreclosure and Vertical Integration," Post-Print halshs-00679847, HAL.
    2. repec:dau:papers:123456789/6313 is not listed on IDEAS
    3. Klaus E. Meyer, 2006. "Globalfocusing: From Domestic Conglomerates to Global Specialists," Journal of Management Studies, Wiley Blackwell, vol. 43(5), pages 1109-1144, July.
    4. Michael G. Jacobides, 2008. "How Capability Differences, Transaction Costs, and Learning Curves Interact to Shape Vertical Scope," Organization Science, INFORMS, vol. 19(2), pages 306-326, April.
    5. Ivo Zander, 2007. "Do You See What I Mean? An Entrepreneurship Perspective on the Nature and Boundaries of the Firm," Journal of Management Studies, Wiley Blackwell, vol. 44(7), pages 1141-1164, November.
    6. Michael G. Jacobides & Lorin M. Hitt, 2005. "Losing sight of the forest for the trees? Productive capabilities and gains from trade as drivers of vertical scope," Strategic Management Journal, Wiley Blackwell, vol. 26(13), pages 1209-1227, December.
    7. Ming-Jer Chen & S. Venkataraman & Sylvia Sloan Black & Ian C. MacMillan, 2002. "The role of irreversibilities in competitive interaction: behavioral considerations from organization theory," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 23(4-5), pages 187-207.
    8. Walter Elberfeld, 2002. "Market size and vertical integration: Stigler’s hypothesis reconsidered," Journal of Industrial Economics, Wiley Blackwell, vol. 50(1), pages 23-42, March.
    9. Hackner, Jonas, 2003. "Vertical Integration and Competition Policy," Journal of Regulatory Economics, Springer, vol. 24(2), pages 213-222, September.
    10. 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.
    11. Deborah L. Swenson, 2007. "Competition and the location of overseas assembly," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 40(1), pages 155-175, February.
    12. Williamson, Oliver E, 1971. "The Vertical Integration of Production: Market Failure Considerations," American Economic Review, American Economic Association, vol. 61(2), pages 112-123, May.
    13. Williamson, Oliver E, 1983. "Credible Commitments: Using Hostages to Support Exchange," American Economic Review, American Economic Association, vol. 73(4), pages 519-540, September.
    14. Michael Mayer & Richard Whittington, 2004. "Economics, Politics and Nations: Resistance to the Multidivisional Form in France, Germany and the United Kingdom, 1983–1993," Journal of Management Studies, Wiley Blackwell, vol. 41(7), pages 1057-1082, November.
    15. John McLaren, 2000. ""Globalization" and Vertical Structure," American Economic Review, American Economic Association, vol. 90(5), pages 1239-1254, December.
    16. Peter J Buckley & Pervez N Ghauri, 2004. "Globalisation, economic geography and the strategy of multinational enterprises," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 35(2), pages 81-98, March.
    17. Philippe Aghion & Rachel Griffith & Peter Howitt, 2006. "U‐shaped relationship between vertical integration and competition: Theory and evidence," International Journal of Economic Theory, The International Society for Economic Theory, vol. 2(3‐4), pages 351-363, September.
    18. Michael G. Jacobides, 2006. "The architecture and design of organizational capabilities," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 15(1), pages 151-171, February.
    19. Robert C. Feenstra, 1998. "Integration of Trade and Disintegration of Production in the Global Economy," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 31-50, Fall.
    20. Michael G. Jacobides & Stephan Billinger, 2006. "Designing the Boundaries of the Firm: From “Make, Buy, or Ally” to the Dynamic Benefits of Vertical Architecture," Organization Science, INFORMS, vol. 17(2), pages 249-261, April.
    21. Alan M. Rugman & Alain Verbeke, 2005. "A Perspective on Regional and Global Strategies of Multinational Enterprises," Chapters, in: Analysis of Multinational Strategic Management, chapter 8, pages 104-119, Edward Elgar Publishing.
    22. Colangelo, Giuseppe, 1995. "Vertical vs. Horizontal Integration: Pre-emptive Merging," Journal of Industrial Economics, Wiley Blackwell, vol. 43(3), pages 323-337, September.
    23. Tucker, Irvin B & Wilder, Ronald P, 1977. "Trends in Vertical Integration in the U.S. Manufacturing Sector," Journal of Industrial Economics, Wiley Blackwell, vol. 26(1), pages 81-94, September.
    24. Peter J Buckley & Pervez N Ghauri, 2004. "Globalisation, economic geography and the strategy of multinational enterprises," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 35(3), pages 255-255, May.
    25. John R. Baldwin & Wulong Gu, 2004. "Trade Liberalization: Export-market Participation, Productivity Growth, and Innovation," Oxford Review of Economic Policy, Oxford University Press, vol. 20(3), pages 372-392, Autumn.
    26. Justine S. Hastings & Richard J. Gilbert, 2005. "Market Power, Vertical Integration And The Wholesale Price Of Gasoline," Journal of Industrial Economics, Wiley Blackwell, vol. 53(4), pages 469-492, December.
    27. Joao Mota & Luis M. de Castro, 2004. "A Capabilities Perspective on the Evolution of Firm Boundaries: A Comparative Case Example from the Portuguese Moulds Industry," Journal of Management Studies, Wiley Blackwell, vol. 41(2), pages 295-316, March.
    28. repec:bla:reviec:v:10:y:2002:i:1:p:113-28 is not listed on IDEAS
    29. David J. Teece & Richard Rumelt & Giovanni Dosi & Sidney Winter, 2000. "Understanding Corporate Coherence: Theory and Evidence," Chapters, in: Innovation, Organization and Economic Dynamics, chapter 9, pages 264-293, Edward Elgar Publishing.
    30. Joskow, Paul L, 1988. "Asset Specificity and the Structure of Vertical Relationships: Empirical Evidence," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 4(1), pages 95-117, Spring.
    31. Filipe M. Santos & Kathleen M. Eisenhardt, 2005. "Organizational Boundaries and Theories of Organization," Organization Science, INFORMS, vol. 16(5), pages 491-508, October.
    32. Mike Geppert & Karen Williams & Dirk Matten, 2003. "The Social Construction of Contextual Rationalities in MNCs: An Anglo‐German Comparison of Subsidiary Choice," Journal of Management Studies, Wiley Blackwell, vol. 40(3), pages 617-641, May.
    33. Schmalensee, Richard, 1988. "Industrial Economics: An Overview," Economic Journal, Royal Economic Society, vol. 98(392), pages 643-681, September.
    34. Ghosal, Vivek, 2002. "Potential foreign competition in US manufacturing," International Journal of Industrial Organization, Elsevier, vol. 20(10), pages 1461-1489, December.
    35. Hans‐Werner Sinn, 2002. "Germany’s Economic Unification: An Assessment after Ten Years," Review of International Economics, Wiley Blackwell, vol. 10(1), pages 113-128, February.
    36. Luis Araujo & Anna Dubois & Lars‐Erik Gadde, 2003. "The Multiple Boundaries of the Firm," Journal of Management Studies, Wiley Blackwell, vol. 40(5), pages 1255-1277, July.
    37. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    38. George J. Stigler, 1951. "The Division of Labor is Limited by the Extent of the Market," Journal of Political Economy, University of Chicago Press, vol. 59(3), pages 185-185.
    39. Alain de Fontenay & Christiaan Hogendorn, 2005. "Entry and Vertical Disintegration," Wesleyan Economics Working Papers 2005-010, Wesleyan University, Department of Economics.
    40. Mary E. Burfisher & Sherman Robinson & Karen Thierfelder, 2001. "The Impact of NAFTA on the United States," Journal of Economic Perspectives, American Economic Association, vol. 15(1), pages 125-144, Winter.
    41. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
    42. Jacobides, Michael G. & Knudsen, Thorbjorn & Augier, Mie, 2006. "Benefiting from innovation: Value creation, value appropriation and the role of industry architectures," Research Policy, Elsevier, vol. 35(8), pages 1200-1221, October.
    43. Diana Farrell, 2005. "Offshoring: Value Creation through Economic Change," Journal of Management Studies, Wiley Blackwell, vol. 42(3), pages 675-683, May.
    44. Robert J. David & Shin‐Kap Han, 2004. "A systematic assessment of the empirical support for transaction cost economics," Strategic Management Journal, Wiley Blackwell, vol. 25(1), pages 39-58, January.
    45. Gilles Chemla, 2003. "Downstream Competition, Foreclosure, and Vertical Integration," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(2), pages 261-289, June.
    46. Karl H. Kahrs, 2002. "Meeting The Maastricht Targets," Review of Policy Research, Policy Studies Organization, vol. 19(4), pages 44-60, December.
    47. Lorin M. Hitt, 1999. "Information Technology and Firm Boundaries: Evidence from Panel Data," Information Systems Research, INFORMS, vol. 10(2), pages 134-149, June.
    48. Laura Rondi & Davide Vannoni, 2005. "Are EU Leading Firms Returning to Core Business? Evidence on Refocusing and Relatedness in a Period of Market Integration," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 27(2), pages 125-145, September.
    49. Michael G. Jacobides & Sidney G. Winter, 2007. "Entrepreneurship and Firm Boundaries: The Theory of A Firm," Journal of Management Studies, Wiley Blackwell, vol. 44(7), pages 1213-1241, November.
    50. Breusch, T S & Pagan, A R, 1979. "A Simple Test for Heteroscedasticity and Random Coefficient Variation," Econometrica, Econometric Society, vol. 47(5), pages 1287-1294, September.
    51. repec:bla:jfinan:v:59:y:2004:i:2:p:479-506 is not listed on IDEAS
    52. Maddigan, Ruth J, 1981. "The Measurement of Vertical Integration," The Review of Economics and Statistics, MIT Press, vol. 63(3), pages 328-335, August.
    53. Deborah L. Swenson, 2005. "Overseas Assembly Production Choices," Contemporary Economic Policy, Western Economic Association International, vol. 23(3), pages 394-403, July.
    54. 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.
    55. Kathryn Rudie Harrigan, 1986. "Matching vertical integration strategies to competitive conditions," Strategic Management Journal, Wiley Blackwell, vol. 7(6), pages 535-555, November.
    56. Mason, Charles F. & Phillips, Owen R., 2000. "Vertical integration and collusive incentives: an experimental analysis," International Journal of Industrial Organization, Elsevier, vol. 18(3), pages 471-496, April.
    57. Frédéric Dalsace & Michael J. Leiblein & Jeffrey J. Reuer, 2002. "Do make or buy decisions matter? The influence of organizational governance on technological performance," Post-Print hal-00457649, HAL.
    58. Jonathan P. Doh, 2005. "Offshore Outsourcing: Implications for International Business and Strategic Management Theory and Practice," Journal of Management Studies, Wiley Blackwell, vol. 42(3), pages 695-704, May.
    59. Beck, Nathaniel & Katz, Jonathan N., 1995. "What To Do (and Not to Do) with Time-Series Cross-Section Data," American Political Science Review, Cambridge University Press, vol. 89(3), pages 634-647, September.
    60. Jeffrey Macher & David Mowery & Timothy Simcoe, 2002. "e-Business and Disintegration of the Semiconductor Industry Value Chain," Industry and Innovation, Taylor & Francis Journals, vol. 9(3), pages 155-181.
    61. Nigel Driffield & James H Love, 2007. "Linking FDI motivation and host economy productivity effects: conceptual and empirical analysis," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 38(3), pages 460-473, May.
    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. Gleich, Wolfgang & Schmeisser, Bjoern & Zschoche, Miriam, 2017. "The influence of competition on international sourcing strategies in the service sector," International Business Review, Elsevier, vol. 26(2), pages 279-287.
    2. Anders Pehrsson, 2019. "When are innovativeness and responsiveness effective in a foreign market?," Journal of International Entrepreneurship, Springer, vol. 17(1), pages 19-40, March.
    3. Mauri, Alfredo J. & Neiva de Figueiredo, João, 2012. "Strategic Patterns of Internationalization and Performance Variability: Effects of US-Based MNC Cross-Border Dispersion, Integration, and Outsourcing," Journal of International Management, Elsevier, vol. 18(1), pages 38-51.
    4. Kraude, Richard & Narasimhan, Ram, 2024. "How does the stakeholder exposure of vertical integration influence environmental performance?," International Journal of Production Economics, Elsevier, vol. 267(C).
    5. Michael C. J. Mayer & Christian Stadler & Julia Hautz, 2015. "The relationship between product and international diversification: The role of experience," Strategic Management Journal, Wiley Blackwell, vol. 36(10), pages 1458-1468, October.
    6. Elango, B. & Dhandapani, Karthik & Giachetti, Claudio, 2019. "Impact of institutional reforms and industry structural factors on market returns of emerging market rivals during acquisitions by foreign firms," International Business Review, Elsevier, vol. 28(5), pages 1-1.
    7. Florian Kaiser & Robert Obermaier, 2020. "Vertical (Dis‑)Integration and Firm Performance: A Management Paradigm Revisited," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 72(1), pages 1-37, February.
    8. Chien-Ming Chen, 2017. "Supply Chain Strategies and Carbon Intensity: The Roles of Process Leanness, Diversification Strategy, and Outsourcing," Journal of Business Ethics, Springer, vol. 143(3), pages 603-620, July.
    9. Claudio Giachetti & Giovanni Battista Dagnino, 2014. "Detecting the relationship between competitive intensity and firm product line length: Evidence from the worldwide mobile phone industry," Strategic Management Journal, Wiley Blackwell, vol. 35(9), pages 1398-1409, September.
    10. Maria Jose Murcia, 2021. "Progressive and Rational CSR as Catalysts of New Product Introductions," Journal of Business Ethics, Springer, vol. 174(3), pages 613-627, December.

    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. Peters, Frank, 2018. "The business of video games is a multi-player game : Essays on governance choices and performance in a two-sided market in the cultural industries," Other publications TiSEM 886b3148-4bbb-4ea4-b666-0, Tilburg University, School of Economics and Management.
    2. Fabio Pieri & Enrico Zaninotto, 2013. "Vertical integration and efficiency: an application to the Italian machine tool industry," Small Business Economics, Springer, vol. 40(2), pages 397-416, February.
    3. Manuel González & Benito Arruñada & Alberto Fernández, 1997. "La decisión de subcontratar: el caso de las empresas constructoras," Investigaciones Economicas, Fundación SEPI, vol. 21(3), pages 501-521, September.
    4. Christian Balcells, 2022. "Determinants of firm boundaries and organizational performance: an empirical investigation of the Chilean truck market," Journal of Evolutionary Economics, Springer, vol. 32(2), pages 423-461, April.
    5. Stefany Moreno Burbano, 2016. "Estructura vertical de la industria manufacturera colombiana entre 1990 - 2013," Borradores de Economia 925, Banco de la Republica de Colombia.
    6. Mukherjee, Debmalya & Nuruzzaman, N. & Gaur, Ajai S. & Singh, Deeksha, 2023. "Pro-market reforms and the outsourcing tradeoffs: Evidence from the transition economies," International Business Review, Elsevier, vol. 32(4).
    7. Florian Kaiser & Robert Obermaier, 2020. "Vertical (Dis‑)Integration and Firm Performance: A Management Paradigm Revisited," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 72(1), pages 1-37, February.
    8. Jean-François Hennart, 2020. "More than intent: A bundling model of MNE–SME interactions," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(7), pages 1176-1194, September.
    9. Kensuke Kubo, 2011. "Explaining vertical integration in the generic pharmaceutical industry," Discussion Papers 11-02, Indian Statistical Institute, Delhi.
    10. Kaouthar Lajili & Joseph T. Mahoney, 2006. "Revisiting agency and transaction costs theory predictions on vertical financial ownership and contracting: electronic integration as an organizational form choice," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 27(7), pages 573-586.
    11. Jain, Amit, 2011. "Connaissance, ressources, concurrence et les frontières de l'entreprise," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/6403 edited by Thiétart, Raymond-Alain.
    12. Mikko Ketokivi & Joseph T. Mahoney, 2020. "Transaction Cost Economics As a Theory of Supply Chain Efficiency," Production and Operations Management, Production and Operations Management Society, vol. 29(4), pages 1011-1031, April.
    13. De Vita, Glauco & Tekaya, Arafet & Wang, Catherine L., 2010. "Asset specificity's impact on outsourcing relationship performance: A disaggregated analysis by buyer-supplier asset specificity dimensions," Journal of Business Research, Elsevier, vol. 63(7), pages 657-666, July.
    14. Ricard Gil & Christian A. Ruzzier, 2018. "The Impact of Competition on “Make-or-Buy” Decisions: Evidence from the Spanish Local TV Industry," Management Science, INFORMS, vol. 64(3), pages 1121-1135, March.
    15. Robert Gibbons, 2010. "Transaction‐Cost Economics: Past, Present, and Future?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(2), pages 263-288, June.
    16. Stephan Manning & Silvia Massini & Carine Peeters & Arie Y. Lewin, 2018. "The changing rationale for governance choices: Early vs. late adopters of global services sourcing," Strategic Management Journal, Wiley Blackwell, vol. 39(8), pages 2303-2334, August.
    17. Mauri, Alfredo J. & Neiva de Figueiredo, João, 2012. "Strategic Patterns of Internationalization and Performance Variability: Effects of US-Based MNC Cross-Border Dispersion, Integration, and Outsourcing," Journal of International Management, Elsevier, vol. 18(1), pages 38-51.
    18. Rakesh Basant & Pulak Mishra, 2019. "Impact of Vertical Integration on Market Power in Indian Manufacturing Sector During the Post-Reform Period," Journal of Industry, Competition and Trade, Springer, vol. 19(4), pages 561-581, December.
    19. Huang, Shihping Kevin, 2014. "The emergence of the outsourcing market and product technological performance," Technological Forecasting and Social Change, Elsevier, vol. 82(C), pages 132-139.
    20. 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.

    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:jomstd:v:46:y:2009:i:2:p:269-307. 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.blackwellpublishing.com/journal.asp?ref=0022-2380 .

    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.