Improving performance through vertical disintegration: evidence from UK manufacturing firms | Zendy

Desyllas Panos | Zendy

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Improving performance through vertical disintegration: evidence from UK manufacturing firms

Author(s) -

Desyllas Panos

Publication year - 2009

Publication title -

managerial and decision economics

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.288

H-Index - 51

eISSN - 1099-1468

pISSN - 0143-6570

DOI - 10.1002/mde.1452

Subject(s) - endogeneity , vertical integration , sample (material) , manufacturing sector , economics , industrial organization , work (physics) , econometrics , business , operations management , microeconomics , labour economics , engineering , mechanical engineering , physics , thermodynamics

Unlike previous work on the vertical integration–performance relationship, we investigate the performance consequences of vertical disintegration. We offer a theoretical justification for the disintegration decision and we condition the disintegration effect on performance on the initial degree of firm integration, the timing and the direction of disintegration. Using a sample of UK manufacturing firms and controlling for disintegration endogeneity, we find that disintegration eventually results in improved operating performance, particularly when disintegration occurs as a reaction to poor performance and in cases of forward between‐sector disintegration. However, being highly integrated does not guarantee gains from disintegration. The implications of these findings are discussed. Copyright © 2008 John Wiley & Sons, Ltd.

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