Vertical Integration and Input Flows

Vertical Integration and Input Flows

We use broad-based yet detailed data from the economy's goodsproducing sectors to investigate firms' ownership of production chains. It does not appear that vertical ownership is primarily used to facilitate transfers of goods along the production chain, as is often presumed: roughly one-h...

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Bibliographic Details
Published in:The American economic review 2014-04, Vol.104 (4), p.1120-1148
Main Authors: Atalay, Enghin, Hortaçsu, Ali, Syverson, Chad
Format: Article
Language:eng
Subjects:
Business ownership
Business structures
Censuses
Commercial production
Commodities
Enterprises
Explanation
Hypothesis
Industrial products
Management science
Manufacturing industries
Ownership
Production
Production planning
Retail industries
Shipments
Studies
System theory
Transfer
U.S.A
Vertical integration
Wholesale trade
ZIP codes
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Summary:We use broad-based yet detailed data from the economy's goodsproducing sectors to investigate firms' ownership of production chains. It does not appear that vertical ownership is primarily used to facilitate transfers of goods along the production chain, as is often presumed: roughly one-half of upstream establishments report no shipments to downstream establishments within the same firm. We propose an alternative explanation for vertical ownership, namely that it promotes efficient intrafirm transfers of intangible inputs. We show evidence consistent with this hypothesis, including the fact that, after a change of ownership, an acquired establishment begins to resemble the acquiring firm along multiple dimensions.
ISSN:0002-8282
1944-7981