Vertical Integration and Technology: Theory and Evidence

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Vertical Integration and Technology: Theory and Evidence

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Title: Vertical Integration and Technology: Theory and Evidence
Author: Zilibotti, Fabrizio; Griffith, Rachel; Aghion, Philippe; Acemoglu, Daron

Note: Order does not necessarily reflect citation order of authors.

Citation: Acemoglu, Daron, Philippe Aghion, Rachel Griffith and Fabrizio Zilibotti. 2010. Vertical integration and technology: theory and evidence. Journal of the European Economic Association 8(5): 989-1033.
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Abstract: This paper investigates the determinants of vertical integration. We first derive a number of predictions regarding the relationship between technology intensity and vertical integration from a simple incomplete contracts model. Then, we investigate these predictions using plant-level data for the UK manufacturing sector. Most importantly, and consistent with theory, we find that the technology intensities of downstream (producer) and upstream (supplier) industries have opposite effects on the likelihood of vertical integration. Also consistent with theory, both these effects are stronger when the supplying industry accounts for a large fraction of the producer’s costs. These results are generally robust and hold with alternative measures of technology intensity, with alternative estimation strategies, and with or without controlling for a number of firm and industry-level characteristics.
Published Version: doi:10.1162/jeea_a_00013
Other Sources: http://ssrn.com/abstract=1071704
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:4554219

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  • FAS Scholarly Articles [7078]
    Peer reviewed scholarly articles from the Faculty of Arts and Sciences of Harvard University
 
 

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