Few people would disagree with the proposition that horizontal mergers have the potential to restrict output and raise consumer prices. In contrast, there is much less agreement about the anti-competitive effects of vertical mergers. The purpose of this paper is to develop a theoretical model showing how vertical integration changes the nature of competition in upstream and downstream markets a...

This paper evaluates the incentive of firms to vertically integrate in a simple 2X2 Bertrand model of two substitutes that are each comprised of two complementary components. It confirms that all prices fall as a result of a vertical merger. Further, we find that, when the composite goods are poor substitutes, producers of complementary components are better off after integration. Thus, at equi...

We set out in this study to analyze the impact of vertical integration on the innovative performance of a firm and to explore the interaction between vertical integration and different modes of external knowledge sourcing. Our empirical results reveal an initial increase in the effect of vertical integration on innovative performance up to a certain level of integration, although this is subseq...

This paper studies the e ects of vertical integration on innovation in the chipset and smartphone industries. I formulate and estimate a dynamic structural model of a dominant upstream chipset maker and downstream smartphone handset makers. The two sides make dynamic investment decisions and negotiate chipset prices via Nash bargaining. Using the estimates, I simulate market outcomes should the...

We analyze in an incomplete contracts model whether a supplier should be integrated if in addition to his investment level he chooses the degree of relationship specificity. A basic trade-off arises: While non-integration leads to higher investment incentives, potential synergies are foregone. Hence, integration can be optimal even though only the supplier makes an investment decision. This may...

This paper studies the interaction between vertical integration and platform ecosystem, two co-existing intra-organizational forms. Specifically, the work investigates the moderating role of platform strategies on the relationship between vertical integration and performance. The study analyzes data from 1922 cinemas of China’s film industry that is undergoing business transformation as a resul...

This paper studies the effects of vertical integration on innovation in the chipset and smartphone industries. I formulate and estimate a dynamic structural model of the upstream chipset maker Qualcomm and downstream smartphone handset makers. The two sides make dynamic investment decisions and negotiate chipset prices via Nash bargaining. Using the estimates, I simulate market outcomes should ...

We show that, despite coordination in the quality level of the components that they provide, independent vertically-related (disintegrated) monopolists will provide products of lower quality level than a sole integrated monopolist. Further, the integrated monopolist achieves higher market coverage, higher consumer surplus, and higher profits. We establish these results for any distribution of p...

In recent years convergence in information industries has often taken the form of vertical agreement between different stage of the value chain and with content owners and distribution channels in a prominent position, suggesting an increasing degree of vertical integration. But when considering indicators at firm level, as the value added to revenues ratio, emerges often a reduction in vertica...

This paper examines vertical integration and its impact on profitability and shareholder value in the global banking industry. We derive a measure for vertical integration using a sample of 859 banks from 9 Anglo-Saxon and European countries covering the timeframe 1997-2002. Our results suggest that banks either operating on highly integrated or highly disintegrated levels of vertical integrati...