IDEAS home Printed from https://ideas.repec.org/a/jfr/jms111/v4y2013i1p1-14.html
   My bibliography  Save this article

The Revival of Vertical Integration: Strategic Choice and Performance Influences

Author

Listed:
  • Dongli Zhang

Abstract

For the past few years, several big companies have taken actions to gain more control over their supply chains. Against the popular trend of outsourcing, they tend to go back to gain a higher level of vertical integration. Just as outsourcing once raised challenges to global management, the revival of vertical integration sure brings benefits as well as new challenges. Motivated by this recent phenomenon, this paper investigates the influences of strategic choices on the change of vertical integration level and the performance implication of such changes. The findings support the cost-driven concern of the decisions on vertical integration level changes and certain performance benefits that the changes would bring to the companies.

Suggested Citation

  • Dongli Zhang, 2013. "The Revival of Vertical Integration: Strategic Choice and Performance Influences," Journal of Management and Strategy, Journal of Management and Strategy, Sciedu Press, vol. 4(1), pages 1-14, February.
    • Handle: RePEc:jfr:jms111:v:4:y:2013:i:1:p:1-14
    as

    Download full text from publisher

    File URL: http://www.sciedu.ca/journal/index.php/jms/article/view/2427/1341
    Download Restriction: no
    File URL: http://www.sciedu.ca/journal/index.php/jms/article/view/2427
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Kirk Monteverde & David J. Teece, 1982. "Supplier Switching Costs and Vertical Integration in the Automobile Industry," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 206-213, Spring.
    2. Williamson, Oliver E, 1979. "Transaction-Cost Economics: The Governance of Contractural Relations," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 233-261, October.
    3. Srinivasan Balakrishnan & Birger Wernerfelt, 1986. "Technical change, competition and vertical integration," Strategic Management Journal, Wiley Blackwell, vol. 7(4), pages 347-359, July.
    4. Economides, Nicholas, 1999. "Quality choice and vertical integration," International Journal of Industrial Organization, Elsevier, vol. 17(6), pages 903-914, August.
    5. Singer, Marcos & Donoso, Patricio & Traverso, Pedro, 2003. "Quality strategies in supply chain alliances of disposable items," Omega, Elsevier, vol. 31(6), pages 499-509, December.
    6. Fernandes, Ana P. & Tang, Heiwai, 2012. "Determinants of vertical integration in export processing: Theory and evidence from China," Journal of Development Economics, Elsevier, vol. 99(2), pages 396-414.
    7. Brickley, James A. & Linck, James S. & Smith, Clifford W., 2012. "Vertical integration to avoid contracting with potential competitors: Evidence from bankers' banks," Journal of Financial Economics, Elsevier, vol. 105(1), pages 113-130.
    8. P. Y. Barreyre, 1988. "The concept of ‘impartition’ policies: A different approach to vertical integration strategies," Strategic Management Journal, Wiley Blackwell, vol. 9(5), pages 507-520, September.
    9. Erin Anderson, 1985. "The Salesperson as Outside Agent or Employee: A Transaction Cost Analysis," Marketing Science, INFORMS, vol. 4(3), pages 234-254.
    10. Gene M. Grossman & Elhanan Helpman, 2002. "Integration versus Outsourcing in Industry Equilibrium," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(1), pages 85-120.
    11. John, George & Weitz, Barton A, 1988. "Forward Integration into Distribution: An Empirical Test of Transaction Cost Analysis," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 4(2), pages 337-355, Fall.
    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. Miroslav Žižka & Petra Rydvalová, 2014. "Influence of Clusters on the Intensity of Innovation Outputs," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 16(37), pages 994-994, August.
    2. Okafor Linus Izediuno & Ifekwem Nkiruka Eugenia & Bello Bashiru Akande & Ajayi Mobolanle Adunola & Omotola Bamigbaiye-Elatuyi & Adebiyi Omolola Oladunke & Modibbo Usman Aliyu & Nnoli Ikenna Theodore, 2024. "Integration Strategies and Competitive Advantage in Manufacturing Sector: Evidence from Ogun State, Nigeria," International Review of Management and Marketing, Econjournals, vol. 14(4), pages 103-112, July.
    3. Angelo Arcuri & Lorenzo Giolli, 2022. "The relationship between upstream vertical integration and environmental sustainability in the luxury fashion industry," SN Business & Economics, Springer, vol. 2(7), pages 1-20, July.

    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. Lajili, Kaouthar & Mahoney, Joseph T., 2005. "Revisiting Agency and Transaction Costs Theory Predictions on Vertical Financial Ownership and Contracting: Electronic Integration as an Organizational Form Choice," Working Papers 05-0106, University of Illinois at Urbana-Champaign, College of Business.
    2. Gonzalez-Diaz, Manuel & Arrunada, Benito & Fernandez, Alberto, 2000. "Causes of subcontracting: evidence from panel data on construction firms," Journal of Economic Behavior & Organization, Elsevier, vol. 42(2), pages 167-187, June.
    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. Fan, Joseph P. H., 2000. "Price uncertainty and vertical integration: an examination of petrochemical firms," Journal of Corporate Finance, Elsevier, vol. 6(4), pages 345-376, December.
    5. Francine Lafontaine & Margaret E. Slade, 1998. "Incentive Contracting and the Franchise Decision," NBER Working Papers 6544, National Bureau of Economic Research, Inc.
    6. 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.
    7. Birger Wernerfelt & Alvin Silk & Shuyi Yu, 2021. "Internalization of Advertising Services: Testing a Theory of the Firm," Marketing Science, INFORMS, vol. 40(5), pages 946-963, September.
    8. Andersen, Otto & Buvik, Arnt, 2001. "Inter-firm co-ordination: international versus domestic buyer-seller relationships," Omega, Elsevier, vol. 29(2), pages 207-219, April.
    9. Marta Fernández-Olmos & Jorge Rosell-Martínez & Manuel A. Espitia-Escuer, 2009. "Vertical integration in the wine industry: a transaction costs analysis on the Rioja DOCa," Agribusiness, John Wiley & Sons, Ltd., vol. 25(2), pages 231-250.
    10. Ma, Yue & Qu, Baozhi & Zhang, Yifan, 2010. "Judicial quality, contract intensity and trade: Firm-level evidence from developing and transition countries," Journal of Comparative Economics, Elsevier, vol. 38(2), pages 146-159, June.
    11. Yong-Mi Kim & Hee Joon Song, 2001. "Determinants of Information Systems (IS) Outsourcing in City Government," International Review of Public Administration, Taylor & Francis Journals, vol. 6(2), pages 103-113, December.
    12. Ji, Chen & de Felipe, Isabel & Briz, Julian & Trienekens, Jacques H., 2012. "An Empirical Study on Governance Structure Choices in China´s Pork Supply Chain," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 15(2), pages 1-32, May.
    13. repec:dgr:rugsom:03g23 is not listed on IDEAS
    14. M. Bensaou & Erin Anderson, 1999. "Buyer-Supplier Relations in Industrial Markets: When Do Buyers Risk Making Idiosyncratic Investments?," Organization Science, INFORMS, vol. 10(4), pages 460-481, August.
    15. 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.
    16. Jacqueline Christensen & Pamela Kent & Tom Smith, 2016. "The decision to outsource risk management services," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 56(4), pages 985-1015, December.
    17. Nooteboom, B., 2002. "Governance and Competence," ERIM Report Series Research in Management ERS-2002-25-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    18. Fernández Olmos, Marta, 2010. "The performance implications of "grow or buy" decisions in the wine industry," Food Policy, Elsevier, vol. 35(3), pages 256-264, June.
    19. Todorova, Tamara, 2010. "Vertical Integration in High-Transaction Cost Sectors: The Case of the Bulgarian Pharmaceutical Industry," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 1(2 (Winter), pages 127-138.
    20. Elaine Mosakowski & Srilata Zaheer, 1999. "The Global Configuration of a Speculative Trading Operation: An Empirical Study of Foreign Exchange Trading," Organization Science, INFORMS, vol. 10(4), pages 401-423, August.
    21. Miguel Espinosa, 2021. "Labor Boundaries and Skills: The Case of Lobbyists," Management Science, INFORMS, vol. 67(3), pages 1586-1607, March.

    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:jfr:jms111:v:4:y:2013:i:1:p:1-14. 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: Jenny Zhang (email available below). General contact details of provider: http://jms.sciedupress.com .

    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.