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Article
Publication date: 1 January 2003

Richard T. Mpoyi

The purpose of the paper is to identify the main characteristics of vertical integration strategies and discuss the effects of those characteristics on companies' ability…

Abstract

The purpose of the paper is to identify the main characteristics of vertical integration strategies and discuss the effects of those characteristics on companies' ability to compete. Using a sample of 316 parent companies, the study found that industry uncertainty affected companies' decisions regarding their levels of vertical integration, but not companies' decisions to change those levels. The study also suggests that a significant number of companies have disintegrated to become more competitive.

Details

Competitiveness Review: An International Business Journal, vol. 13 no. 1
Type: Research Article
ISSN: 1059-5422

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Article
Publication date: 1 March 2000

Guido A. Krickx

This paper shows that uncertainty is a multidimensional theoretical concept, which has empirical implications for the relationship with vertical integration. In a survey…

Abstract

This paper shows that uncertainty is a multidimensional theoretical concept, which has empirical implications for the relationship with vertical integration. In a survey of empirical work that tests the relation between uncertainty and vertical integration, this paper demonstrates that performance ambiguity and general measures of uncertainty are positively related with vertical integration, technological uncertainty is negatively related, while market uncertainty and complexity are not systematically related to vertical integration.

Details

The International Journal of Organizational Analysis, vol. 8 no. 3
Type: Research Article
ISSN: 1055-3185

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Article
Publication date: 1 January 1983

Kathryn Rudie Harrigan

Vertical integration is often one of the first diversification strategies that firms consider. To choose the right strategy, companies must assess the four different types…

Abstract

Vertical integration is often one of the first diversification strategies that firms consider. To choose the right strategy, companies must assess the four different types of possible integration and weigh the merits of each.

Details

Journal of Business Strategy, vol. 3 no. 3
Type: Research Article
ISSN: 0275-6668

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Book part
Publication date: 3 October 2006

Giacomo Negro and Olav Sorenson

We investigate the competitive consequence of vertical integration on organizational performance using a comprehensive dataset of U.S. motion picture production companies…

Abstract

We investigate the competitive consequence of vertical integration on organizational performance using a comprehensive dataset of U.S. motion picture production companies, which includes information on their vertical scope and competitive overlaps. Vertical integration appears to change the dynamics of competition in two ways: (i) it buffers the vertically integrated firms from environmental dependence and (ii) it intensifies competition among non-integrated organizations. In contrast to the existing literature, our results suggest that vertical integration has implications well beyond both the level of the individual transaction and even the internal efficiency of the integrated firm.

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Ecology and Strategy
Type: Book
ISBN: 978-1-84950-435-5

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Article
Publication date: 9 March 2012

Wei Guan and Jakob Rehme

Strategic concentration is a key issue for manufacturing companies when designing a supply chain. As a corporate strategy and a supply chain governance strategy, vertical

Abstract

Purpose

Strategic concentration is a key issue for manufacturing companies when designing a supply chain. As a corporate strategy and a supply chain governance strategy, vertical integration relates to organisational economics and strategic supply chain management. Numerous explanations have been created for vertical integration, and transaction cost economics (TCE) provides a theoretical basis to help understand the process. However, the current popularity of vertical integration seems inspired by something more than altering industry structure and minimising cost, which are the traditionally accepted explanations for vertical integration This paper aims to explore the driving forces for vertical integration, particularly downstream integration of distribution, and the consequences of vertical integration in a manufacturer‐distributor‐reseller chain.

Design/methodology/approach

This study adopted an exploratory case study approach to examine a Swedish‐based timber manufacturer that vertically integrated a distribution centre in the UK, which made it a direct supplier to DIY retailers and builders' merchants. Data were collected primarily through open‐ended, face‐to‐face interviews.

Findings

The study found that the most important factors driving the manufacturer's vertical integration of distribution were the demands of large retail chains and the manufacturer's decisions to focus on developing its positioning strategy in the supply chain. Vertical integration has transformed the manufacturer into a supplier to large timber products resellers, offering the firm a greater potential to provide integrated solutions and, therefore, become a strategic partner to its customers.

Originality/value

This empirical study examined a building material distribution channel, a subject that has rarely been studied. Study results add empirical evidence to explanations and impacts of vertical integration, especially the integration of customer interface.

Details

Supply Chain Management: An International Journal, vol. 17 no. 2
Type: Research Article
ISSN: 1359-8546

Keywords

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Article
Publication date: 7 August 2017

Hans Lind

The purpose of this paper is to explain why some real estate companies choose to have a vertically integrated structure, instead of specializing in only stage of the…

Abstract

Purpose

The purpose of this paper is to explain why some real estate companies choose to have a vertically integrated structure, instead of specializing in only stage of the production chain.

Design/methodology/approach

The first stage of the research was an extensive literature review to generate hypotheses. A case study method was then chosen, as more detailed knowledge about the companies were judged to be needed to evaluate the different hypothesis. Documents about the companies were studied and interviews carried out.

Findings

In the studies cases, there is no support for theories related to vertical integration as a way to monopolize a market and only marginal support for theories that focus on contracting problems related to the so called hold up problem. The most important factors for the companies were that vertical integration gives information and more options that are important in small number bargaining situations. The companies bargaining power increases when they are better informed about, e.g. costs and profits in nearby activities, and when they can use in-house units, if there are problems to find reasonable conditions on the outside market.

Research limitations/implications

The main limitation is that only three cases were studied.

Practical/implications

The study can be helpful both to companies that choose to integrate vertically and those that chose not to. There are similar problems related to information and bargaining power that needs to be handled.

Originality/value

This is the first study that test theories about vertical integration in the real estate sector.

Details

Journal of European Real Estate Research, vol. 10 no. 2
Type: Research Article
ISSN: 1753-9269

Keywords

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Article
Publication date: 1 March 2013

Li Ding and Jalesh Mahbubani

The aim of this paper is to develop a two‐stage decision model of vertical integration by breaking down integration decisions into two stages: extent of integration and…

Abstract

Purpose

The aim of this paper is to develop a two‐stage decision model of vertical integration by breaking down integration decisions into two stages: extent of integration and direction of integration.

Design/methodology/approach

The study uses price premium as a proxy for differentiation‐based competitive advantage. The relationship between the extent of vertical integration and price premium through a vehicle of consumers' brand perception is explored. A segmentation‐based analysis is performed to study whether different vertical integration configurations are related to price premiums at different levels.

Findings

Vertical integration relates positively to price premium set by apparel companies; consumers' perception of brand quality mediates the relationship. Findings also suggest that an organization should opt for integration if vertical integration generates greater effect on price premium as relative to the cost. Strength of internal and forward integration is related strongly to higher price premiums than integration balance.

Research limitations/implications

Further research is encouraged to test if the findings of this study can be generalized to other industries and/or other types of supplier relationship integration, e.g. partnership, strategic alliance and joint venture.

Originality/value

As a departure from extant literature, it is argued that vertical integration is a viable strategy that enables companies to gain differentiation‐based advantage. A conceptual model is developed and applied to the apparel industry, which explains critical issues involved in the design of supply chain structures.

Details

Management Decision, vol. 51 no. 2
Type: Research Article
ISSN: 0025-1747

Keywords

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Article
Publication date: 1 February 1996

Edward J. Nugent and David J. Hamblin

Vertical integration is a key strategic management decision which requires research support. Existing literature is extensive but is preoccupied with measures of the…

Abstract

Vertical integration is a key strategic management decision which requires research support. Existing literature is extensive but is preoccupied with measures of the extent of vertical integration rather than the fundamental effectiveness of the strategy. The industrial community that the research seeks to benefit is left with an array of measures of integration and an array of widely differing conclusions regarding its potential benefit to a business. Research should be driven by customer need and the decision areas industrialists need to address should set the research agenda. Identifies the key issues relating to vertical integration and the extent to which these are addressed by existing methodologies. Develops a new methodology which avoids the intractable problem of measuring the extent of integration. Adoption of this methodology would enable more coherent and clear messages to be sent to management, thus enabling more informed decision making.

Details

Integrated Manufacturing Systems, vol. 7 no. 1
Type: Research Article
ISSN: 0957-6061

Keywords

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Article
Publication date: 13 May 2020

Xing Wan, Nianxin Wang and Ben Shaw-Ching Liu

This study takes the cinema industry as the research context and investigates the impact of online to offline (O2O) platforms on cinemas' performance. Specifically, the…

Abstract

Purpose

This study takes the cinema industry as the research context and investigates the impact of online to offline (O2O) platforms on cinemas' performance. Specifically, the purposes of this paper are threefold: first, to study the influence of platform multihoming on cinemas' performance; second, to examine the interaction impact of platform multihoming and vertical integration; third, to investigate how the influence of platform multihoming varies with cinemas' performance.

Design/methodology/approach

This study collects data from 1918 cinemas in China, employs quantile regressions to estimate the model and test the proposed hypotheses and adopts an instrumental variable method to examine the robustness of our results.

Findings

The findings confirm the positive role of platform multihoming for cinemas' performance. However, when a cinema has low-degree platform multihoming, the cinema's vertical integration is positively associated with its performance; when a cinema has high-degree platform multihoming, the cinema's vertical integration is negatively associated with its performance. Furthermore, results from quantile regressions indicate that low-performance cinemas benefit more than high-performance cinemas from employing platform multihoming strategy.

Research limitations/implications

This paper extends previous research by investigating the impact of platform multihoming on heterogeneous firms and the impact of interaction between platform multihoming and vertical integration. The findings imply that the impact of platform multihoming on firms' performance depends on firms' performance attributes and their vertical relationships.

Practical implications

Platform multihoming can be a double-edged sword for local service firms. When multihoming platforms, a local service firm should think about the fit between platforms and its own attributes, and identify the potential conflict between platform relationships and traditional relationships of industrial organization.

Originality/value

There is a growing interest in understanding platforms' role in the digital economy. The impact of platform participation on local service firms' performance is not sufficiently investigated. Previous research rarely addressed the impact by incorporating local service firms' performance attributes and the existing relationships of industrial organization.

Details

Internet Research, vol. 30 no. 5
Type: Research Article
ISSN: 1066-2243

Keywords

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Article
Publication date: 21 August 2007

Sylvain Charlebois and Ronald D. Camp

The paper intends to identify and explain key managerial principles for vertical integration in the cattle industry during a key period of environment uncertainty.

Abstract

Purpose

The paper intends to identify and explain key managerial principles for vertical integration in the cattle industry during a key period of environment uncertainty.

Design/methodology/approach

Following Yin's advice on using case studies for exploratory theory development, this study builds on existing theories of vertical integration through a case study that explores potential prospects for cattle producers in a uniquely uncertain environment and the execution of a higher degree of vertical integration in a mature market.

Findings

The creation of NVF is a result of a well‐groomed uncertainty management scheme designed to attain a higher degree of vertical integration within an enterprising community. Some key managerial principles have been identified that can be applied to a thriving vertical integration endeavour in the cattle industry. History has proven that such an undertaking is taxing. Nevertheless, by looking at NVF's business model, it can be seen that environmental uncertainty can facilitate vertical integration projects in the cattle industry, given the right community‐oriented doctrine.

Research limitations/implications

This case study does not include cases where cattle producers were not so successful.

Practical implications

It provides advice for managing vertical integration by networks of small business owners in the cattle industry. The BSE crisis seems to have triggered efforts to decrease dependency, especially by outside stakeholders. NVF focused its members on building a business model and long‐term objectives beyond the specific uncertainties created by bovine spongiform encephalopathy (BSE), such as whether the border reopened or stayed permanently closed to foreign markets. Domestic consumers were their core marketing priority at the outset. In addition, future plans were set in motion to create a strategy to seek other foreign markets, including the EU.

Originality/value

The case study presented in this paper provides an example of vertical integration as a strategic response to market uncertainty enhanced by a political and economic crisis in a rural community. This paper also outlines key events of the Canadian BSE crisis, the Canadian beef industry and surrounding communities, and the relevance of past research on environmental uncertainty and vertical integration in explaining why vertical integration has been strategically unnatural to cattle producers but occurred in this situation.

Details

Journal of Enterprising Communities: People and Places in the Global Economy, vol. 1 no. 3
Type: Research Article
ISSN: 1750-6204

Keywords

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