Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/71462 
Year of Publication: 
2004
Series/Report no.: 
IFS Working Papers No. 04/34
Publisher: 
Institute for Fiscal Studies (IFS), London
Abstract: 
This paper investigates the determinants of vertical integration using data from the UK manufacturing sector. We find that the relationship between a downstream (producer) industry and an upstream (supplier) industry us more likely to be vertically integrated when the producing industry is more technology intensive and the supplying industry is less technology intensive. Moreover, both of 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 straegies, and with or without contraolling for a number of firm and industry-level characteristics. They are consistent with the incomplete contract theories of the firm that emphasize both the potential costs and benefits of vertical integration in terms of investment incentives.
Subjects: 
holdup
incomplete contracts
internal organisation fo the firm
investment
R&D
technology
vertical integration
JEL: 
L22
L23
L24
L60
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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