TY  - JOUR
AU  - Acemoglu,Daron
AU  - Aghion,Philippe
AU  - Griffith,Rachel
AU  - Zilibotti,Fabrizio
TI  - Vertical Integration and Technology: Theory and Evidence
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10997
PY  - 2004
Y2  - December 2004
UR  - http://www.nber.org/papers/w10997
L1  - http://www.nber.org/papers/w10997.pdf
N1  - Author contact info:
Daron Acemoglu
Department of Economics
MIT, E52-380B
50 Memorial Drive
Cambridge, MA  02142-1347
Tel: 617/253-1927
Fax: 617/253-1330
E-Mail: daron@mit.edu

Philippe Aghion
Department of Economics
Harvard University
1805 Cambridge St
Cambridge, MA 02138
Tel: 617/495-6675
Fax: 617/495-4341
E-Mail: paghion@fas.harvard.edu

Rachel Griffith
IFS
7 Ridgmont Street
London WC1E 7AE
UK
E-Mail: rgriffith@ifs.org.uk

Fabrizio Zilibotti
Department of Economics
University of Zurich
Mühlebachstrasse 86
CH-8008 Zürich
Switzerland
Tel: +41 44 6345188
E-Mail: fabrizio.zilibotti@econ.uzh.ch
AB  - This paper investigates the determinants of vertical integration using data from the UK manufacturing sector. We find that the relationship between a downstream (producer) industry and an upstream (supplier) industry is more likely to be vertically integrated when the producing industry is more technology intensive and the supplying industry is less technology intensive. Moreover, both of these effects are stronger when the supplying industry accounts for a large fraction of the producer's costs. These results are generally robust and hold with alternative measures of technology intensity, with alternative estimation strategies, and with or without controlling for a number of firm and industry-level characteristics. They are consistent with the incomplete contract theories of the firm that emphasize both the potential costs and benefits of vertical integration in terms of investment incentives.
ER  -