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| Author: | Acemoglu, D. (et. al) |
| Title: | Vertical integration and technology: theory and evidence |
| Journal: | Journal of the European Economic Association
2010 : SEP, VOL. 8:5, p. 989-1033 |
| Index terms: | vertical integration contracts manufacturing industry United Kingdom technology |
| Language: | eng |
| Abstract: | This paper investigates the determinants of vertical integration. First, a number of predictions are derived regarding the relationship between technology intensity and vertical integration from a simple model of incomplete contracts. Then, these predictions are inspected using plant-level data for the UK manufacturing sector. Most importantly, we find that the technology intensity of downstream (producer) industries positively correlates with the probability of integration and negatively with the intensity of upstream (supplier) industries. This is consistent with the theoretical predictions. Both correlations are stronger when the supplying industry accounts for a large portion of the producer's costs. The results are generally robust and hold with optional measures of technology intensity, alternative estimation strategies, and with or without controlling for several firm- and industry-level characteristics. |
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