IDEAS home Printed from https://ideas.repec.org/a/eee/lauspo/v131y2023ics0264837723001849.html
   My bibliography  Save this article

What drives developers? Understanding vertical (dis)integration strategies in the land development process

Author

Listed:
  • Meijer, Rick
  • Buitelaar, Edwin

Abstract

Real estate developers play a crucial role in the production of our cities. Yet, the knowledge about how they operate is limited. They are often portrayed as a homogeneous group, while in practice we see a large variety of different types of developers and of their strategies. Particularly striking are the differences in the extent to which real estate developers cover the land development process. Some limit themselves to development, while others incorporate strategic land acquisition, construction, and/or long-term investment. With the help of theories from organisational economics, we explore different vertical integration strategies and the motives behind them. We apply these insights to cases from the Dutch homebuilding industry. Our analysis leads to a conceptualisation and categorisation of real estate developers according to their vertical integration strategy and we identify different motives behind those strategies. We find that vertical (dis)integration strategies are informed by strategic considerations, such as land assembly in order to secure future workload in construction, by price advantages, and by transaction-cost considerations that are related to the highly specific nature of some activities in the land development process.

Suggested Citation

  • Meijer, Rick & Buitelaar, Edwin, 2023. "What drives developers? Understanding vertical (dis)integration strategies in the land development process," Land Use Policy, Elsevier, vol. 131(C).
    • Handle: RePEc:eee:lauspo:v:131:y:2023:i:c:s0264837723001849
    DOI: 10.1016/j.landusepol.2023.106718
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0264837723001849
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.landusepol.2023.106718?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
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. 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.
    2. Patsy Healey, 1998. "Regulating property development and the capacity of the development industry," Journal of Property Research, Taylor & Francis Journals, vol. 15(3), pages 211-227, January.
    3. Osegowitsch, Thomas & Madhok, Anoop, 2003. "Vertical integration is dead, or is it?," Business Horizons, Elsevier, vol. 46(2), pages 25-34.
    4. Isabel Díez‐Vial, 2007. "Explaining Vertical Integration Strategies: Market Power, Transactional Attributes and Capabilities," Journal of Management Studies, Wiley Blackwell, vol. 44(6), pages 1017-1040, September.
    5. Birger Wernerfelt, 1984. "A resource‐based view of the firm," Strategic Management Journal, Wiley Blackwell, vol. 5(2), pages 171-180, April.
    6. Whyte, Glen, 1994. "The role of asset specificity in the vertical integration decision," Journal of Economic Behavior & Organization, Elsevier, vol. 23(3), pages 287-302, May.
    7. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
    8. Carlton, Dennis W, 1979. "Vertical Integration in Competitive Markets under Uncertainty," Journal of Industrial Economics, Wiley Blackwell, vol. 27(3), pages 189-209, March.
    9. Davis, Morris A. & Palumbo, Michael G., 2008. "The price of residential land in large US cities," Journal of Urban Economics, Elsevier, vol. 63(1), pages 352-384, January.
    10. DiPasquale, Denise, 1999. "Why Don't We Know More about Housing Supply?," The Journal of Real Estate Finance and Economics, Springer, vol. 18(1), pages 9-23, January.
    11. James R. Dewald & Jeremy Hall & James J. Chrisman & Franz W. Kellermanns, 2007. "The Governance Paradox: Preferences of Small Vulnerable Firms in the Homebuilding Industry," Entrepreneurship Theory and Practice, , vol. 31(2), pages 279-297, March.
    12. Allen, Bruce T, 1971. "Vertical Integration and Market Foreclosure: The Case of Cement and Concrete," Journal of Law and Economics, University of Chicago Press, vol. 14(1), pages 251-274, April.
    Full references (including those not matched with items on IDEAS)

    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. Davide Vannoni, 1999. "Empirical Studies of Vertical Integration: the Transaction Cost Orthodoxy," CERIS Working Paper 199903, CNR-IRCrES Research Institute on Sustainable Economic Growth - Torino (TO) ITALY - former Institute for Economic Research on Firms and Growth - Moncalieri (TO) ITALY.
    2. Amirah El-Haddad, 2023. "Political Patronage and Economic Opportunity: Vertical Integration in Egyptian Textiles and Clothing," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 35(5), pages 1224-1257, October.
    3. 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.
    4. Basu, Shubhabrata & Pereira, Vijay & Sinha, Paresha & Malik, Ashish & Moovendhan, V., 2022. "Esoteric governance mechanism and collective brand equity creation in confederated organizations: Evidence from an emerging economy," Journal of Business Research, Elsevier, vol. 149(C), pages 217-230.
    5. Garvey, Gerald T., 1995. "Why reputation favors joint ventures over vertical and horizontal integration A simple model," Journal of Economic Behavior & Organization, Elsevier, vol. 28(3), pages 387-397, December.
    6. Oliver Hart & Jean Tirole, 1990. "Vertical Integration and Market Foreclosure," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1990 Micr), pages 205-286.
    7. Bahadir, Berrak & Mykhaylova, Olena, 2014. "Housing market dynamics with delays in the construction sector," Journal of Housing Economics, Elsevier, vol. 26(C), pages 94-108.
    8. George W. J. Hendrikse, 1998. "Screening, Competition and the Choice of the Cooperative as an Organisational Form," Journal of Agricultural Economics, Wiley Blackwell, vol. 49(2), pages 202-217, June.
    9. Tarsalewska, Monika, 2015. "The timing of mergers along the production chain, capital structure, and risk dynamics," Journal of Banking & Finance, Elsevier, vol. 57(C), pages 51-64.
    10. Simshauser, P., 2020. "Merchant utilities and boundaries of the firm: vertical integration in energy-only markets," Cambridge Working Papers in Economics 2039, Faculty of Economics, University of Cambridge.
    11. Jolink, Albert & Niesten, Eva, 2012. "Recent qualitative advances on hybrid organizations: Taking stock, looking ahead," Scandinavian Journal of Management, Elsevier, vol. 28(2), pages 149-161.
    12. Chen, J. & Elliott, M. & Koh, A., 2020. "Capability Accumulation and Conglomeratization in the Information Age," Cambridge Working Papers in Economics 2069, Faculty of Economics, University of Cambridge.
    13. Thiele, Veikko, 2007. "The Demand for Tailored Goods and the Theory of the Firm," MPRA Paper 2471, University Library of Munich, Germany.
    14. Mauricio Medeiros Jr & Bernardus Van Doornik, 2021. "Human Capital and Startup Financing," Working Papers Series 546, Central Bank of Brazil, Research Department.
    15. Markus K. Brunnermeier & Christian Julliard, 2008. "Money Illusion and Housing Frenzies," The Review of Financial Studies, Society for Financial Studies, vol. 21(1), pages 135-180, January.
    16. 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.
    17. 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.
    18. Simshauser, Paul & Tian, Yuan & Whish-Wilson, Patrick, 2015. "Vertical integration in energy-only electricity markets," Economic Analysis and Policy, Elsevier, vol. 48(C), pages 35-56.
    19. Sukkoo Kim, 1998. "The Rise of Multiunit Firms in U.S. Manufacturing," NBER Working Papers 6425, National Bureau of Economic Research, Inc.
    20. Andre Luis da Silva Leite & Nei Antonio Nunes, 2020. "Institutional Environment and the Strategies of the Firms of the Brazilian Electricity Industry," International Journal of Energy Economics and Policy, Econjournals, vol. 10(6), pages 53-58.

    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:eee:lauspo:v:131:y:2023:i:c:s0264837723001849. 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: Joice Jiang (email available below). General contact details of provider: https://www.journals.elsevier.com/land-use-policy .

    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.