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Vertical integration: A comparative analysis of performance and risk
Author(s) -
Reed Richard,
Fronmueller Michael P.
Publication year - 1990
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.4090110305
Subject(s) - argument (complex analysis) , vertical integration , ex ante , function (biology) , selection (genetic algorithm) , horizontal and vertical , psychology , economics , operations management , computer science , industrial organization , mathematics , artificial intelligence , macroeconomics , biochemistry , chemistry , geometry , evolutionary biology , biology
Hofer's (1973) argument for strategy analysis by matched pairs forms a central methodological feature in this examination of vertical integration. With twenty matched pairs of companies we have sought to eliminate the major extraneous factors that have precluded consensus among previous research findings. Our results show that vertical integration (via whole ownership) is performance and risk‐neutral. Support is generated for the fundamental notion that successful strategy selection, and subsequent performance, is a function of firm‐specific competencies and opportunities. Consequently, we urge that research on vertical integration move forward to consider ex ante conditions of fit rather than continuing to pursue ex post rationalizations of performance and risk.