Business Performance and Vertical Integration

摘要

The focus of this empirical study is the relationship between vertical integration, as an element of market structure, and the price-cost margin, as a component of a firm's performance. The models presented in this paper differ from previous efforts because vertical integration is measured by the Vertical Industry Connections (VIC) index. VIC is defined as a function of the relative net interactions among the industries in which a firm operates. The results indicate that VIC is significant in increasing th price-cost margin, supporting the hypothesis that vertical intergration can be employed as a strategy to enhance business performance. (ERA citation 06:032775)