Vertical Integration and Firm Boundaries: The Evidence
Journal of Economic Literature
vol. 45,
no. 3, September 2007
(pp. 629-685)
Abstract
Since Ronald H. Coase's (1937) seminal paper, a rich set of theories has been developed that deal with firm boundaries in vertical or input–output structures. In the last twenty-five years, empirical evidence that can shed light on those theories also has been accumulating. We review the findings of empirical studies that have addressed two main interrelated questions: First, what types of transactions are best brought within the firm and, second, what are the consequences of vertical integration decisions for economic outcomes such as prices, quantities, investment, and profits. Throughout, we highlight areas of potential cross-fertilization and promising areas for future work.Citation
Lafontaine, Francine, and Margaret Slade. 2007. "Vertical Integration and Firm Boundaries: The Evidence." Journal of Economic Literature, 45 (3): 629-685. DOI: 10.1257/jel.45.3.629JEL Classification
- D23 Organizational Behavior; Transaction Costs; Property Rights
- D82 Asymmetric and Private Information; Mechanism Design
- G34 Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
- L14 Transactional Relationships; Contracts and Reputation; Networks
- L22 Firm Organization and Market Structure
- L25 Firm Performance: Size, Diversification, and Scope