Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/257355 
Year of Publication: 
2021
Citation: 
[Journal:] Economies [ISSN:] 2227-7099 [Volume:] 9 [Issue:] 4 [Article No.:] 197 [Publisher:] MDPI [Place:] Basel [Year:] 2021 [Pages:] 1-14
Publisher: 
MDPI, Basel
Abstract: 
In vertical integration literature, the two processes leading to vertical integration, namely, (1) self-expansion of the scope of activities based on internal capabilities and (2) internalization of activities with external capabilities have not been distinguished. However, using internal capabilities or incorporating external capabilities is an alternative decision for managers and distinguishing them is crucial in practice. The purpose of this study is to distinguish self-expansion separated from internalization and to explain systematically when they likely occur. This study develops a unique vertical integration model by integrating transaction cost economics and the capability approach. With the model, we systematically analyzed the occurrence of (1) self-expansion and (2) internalization. Results reveal that the firm prefers self-expansion to internalization if it is easy to build the capabilities internally or difficult to procure them from outside the firm and if the costs of acquiring a firm or business with the required capabilities or the governance costs of the activities with external capabilities are high and vice versa. Our model leads to more understanding of vertical integration.
Subjects: 
capability approach
internalization
self-expansion
transaction cost economics
vertical integration
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.