IDEAS home Printed from https://ideas.repec.org/a/taf/oxdevs/v37y2009i1p19-32.html
   My bibliography  Save this article

Vertical Integration and Sunk Capital in Transition Economies

Author

Listed:
  • Vladimir Dvoracek

Abstract

Agency problems in inter-firm trading relationships are severe in developing and transitional economies because of the limited decentralized information that can support contract enforcement and because the timing of intermediate goods production and payment differ. The consequences are derived for the equilibrium distribution of firm structures, production, prices, profits and trade in developing and transitional economies. Within a multi-market setting, equilibrium outcomes are characterized both for firms that are directly affected by contracting problems and for those that are not. The equilibrium features both excessive vertical integration and excessive development of small-scale retail enterprises, and insufficient, inefficient inter-firm trade. Average profits of vertically integrated firms are higher and those of small-scale retail enterprises and intermediate suppliers are lower than they would be were enduring trading relationships more easily established.

Suggested Citation

  • Vladimir Dvoracek, 2009. "Vertical Integration and Sunk Capital in Transition Economies," Oxford Development Studies, Taylor & Francis Journals, vol. 37(1), pages 19-32.
    • Handle: RePEc:taf:oxdevs:v:37:y:2009:i:1:p:19-32
    DOI: 10.1080/13600810802695972
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/13600810802695972
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/13600810802695972?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. Randolph Luca Bruno & Maria Bytchkova & Saul Estrin, 2013. "Institutional Determinants of New Firm Entry in Russia: A Cross-Regional Analysis," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1740-1749, December.
    2. Judith Thornton & Nadezhda N Mikheeva, 1996. "The Strategies of Foreign and Foreign-Assisted Firms in the Russian Far East: Alternatives to Missing Infrastructure," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 38(4), pages 85-119, December.
    3. Williamson, Oliver E., 2007. "Transaction Cost Economics: An Introduction," Economics Discussion Papers 2007-3, Kiel Institute for the World Economy (IfW Kiel).
    4. Barberis, Nicholas & Maxim Boycko & Andrei Shleifer & Natalia Tsukanova, 1996. "How Does Privatization Work? Evidence from the Russian Shops," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 764-790, August.
    5. Rachel E. Kranton & Deborah F. Minehart, 2002. "Vertical Foreclosure and Specific Investments," Economics Working Papers 0013, Institute for Advanced Study, School of Social Science.
    6. Greif, Avner, 2000. "The fundamental problem of exchange: A research agenda in Historical Institutional Analysis," European Review of Economic History, Cambridge University Press, vol. 4(3), pages 251-284, December.
    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. Maria Litvinova & Maria Luigia Segnana, 2015. "Firm boundaries in Transition countries. The influence of technological and institutional links," DEM Working Papers 2015/05, Department of Economics and Management.
    2. Professor Dr. Joachim Zentes, 2011. "„Sustainability – Supply Security – Distributive Justice: A Global Area Of Conflict“," Annals of University of Craiova - Economic Sciences Series, University of Craiova, Faculty of Economics and Business Administration, vol. 2(39), pages 201-218, May.

    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. Polterovich, Victor, 2000. "Employment- wage decisions in the insider-owned firm," BOFIT Discussion Papers 1/2000, Bank of Finland, Institute for Economies in Transition.
    2. Ashantha Ranasinghe & Xuejuan Su, 2023. "When social assistance meets market power: A mixed duopoly view of health insurance in the United States," Economic Inquiry, Western Economic Association International, vol. 61(4), pages 851-869, October.
    3. Lu, Susan Feng & Dranove, David, 2013. "Profiting from gaizhi: Management buyouts during China’s privatization," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 634-650.
    4. Akcigit, Ufuk & Alp, Harun & Diegmann, André & Serrano-Velarde, Nicolas, 2024. "Committing to grow: Employment targets and firm dynamics," IWH Discussion Papers 17/2023, Halle Institute for Economic Research (IWH), revised 2024.
    5. Pelikan, Pavel, 1999. "Institutions for the Selection of Entrepreneurs: Implications for Economic Growth and Financial Crises," Working Paper Series 510, Research Institute of Industrial Economics, revised 15 Feb 2000.
    6. Mika Kallioinen, 2017. "Inter‐communal institutions in medieval trade," Economic History Review, Economic History Society, vol. 70(4), pages 1131-1152, November.
    7. Rodríguez-Pose, Andrés & Zhang, Min, 2020. "The cost of weak institutions for innovation in China," Technological Forecasting and Social Change, Elsevier, vol. 153(C).
    8. Tor Eriksson, 2005. "Managerial pay and executive turnover in the Czech and Slovak Republics," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(4), pages 659-677, October.
    9. Vitola, Alise & Grigoriadis, Theocharis, 2018. "Diversity & empire: Baltic Germans & comparative development," Discussion Papers 2018/6, Free University Berlin, School of Business & Economics.
    10. Claessens,Constantijn A. & Djankov, Simeon, 1998. "Politicians and firms in seven central and eastern European countries," Policy Research Working Paper Series 1954, The World Bank.
    11. Nandini Gupta & John C. Ham & Jan Svejnar, 2000. "Priorities and Sequencing in Privatization: Theory and Evidence from the Czech Republic," William Davidson Institute Working Papers Series 323, William Davidson Institute at the University of Michigan.
    12. Fidrmuc, Jana P. & Fidrmuc, Jan, 2006. "Can you teach old dogs new tricks? On complementarity of human capital and incentives," Journal of International Money and Finance, Elsevier, vol. 25(3), pages 445-458, April.
    13. Slapničar, Sergeja & Axelsen, Micheal & Bongiovanni, Ivano & Stockdale, David, 2023. "A pathway model to five lines of accountability in cybersecurity governance," International Journal of Accounting Information Systems, Elsevier, vol. 51(C).
    14. Mukhiddin Jumaev & Prof. Dr. Dileep Kumar. M. & Jalal R. M. Hanaysha, 2012. "Impact Of Relationship Marketing On Customer Loyalty In The Banking Sector," Far East Journal of Psychology and Business, Far East Research Centre, vol. 6(4), pages 36-55, March.
    15. Broadberry Stephen, 2012. "Recent Developments in the Theory of Very Long Run Growth: A Historical Appraisal," Jahrbuch für Wirtschaftsgeschichte / Economic History Yearbook, De Gruyter, vol. 53(1), pages 277-306, May.
    16. Chuantao Cui & Leona Shao-Zhi Li, 2024. "More but not better: Career incentives of local leaders and entrepreneurial entry in China," Working Papers 202417, University of Macau, Faculty of Business Administration.
    17. Gaaitzen J. Vries, 2014. "Productivity in a Distorted Market: The Case of Brazil's Retail Sector," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(3), pages 499-524, September.
    18. Aidis, Ruta & Estrin, Saul & Mickiewicz, Tomasz, 2008. "Institutions and entrepreneurship development in Russia: A comparative perspective," Journal of Business Venturing, Elsevier, vol. 23(6), pages 656-672, November.
    19. Gong, Stephen X.H. & Cullinane, Kevin & Firth, Michael, 2012. "The impact of airport and seaport privatization on efficiency and performance: A review of the international evidence and implications for developing countries," Transport Policy, Elsevier, vol. 24(C), pages 37-47.
    20. Vladimir Sokolov & Laura Solanko, 2017. "Political Influence, Firm Performance and Survival," HSE Working papers WP BRP 60/FE/2017, National Research University Higher School of Economics.

    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:taf:oxdevs:v:37:y:2009:i:1:p:19-32. 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: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/CODS20 .

    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.