TY  - JOUR
AU  - Acemoglu,Daron
AU  - Johnson,Simon
AU  - Mitton,Todd
TI  - Determinants of Vertical Integration: Finance, Contracts, and Regulation
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11424
PY  - 2005
Y2  - June 2005
UR  - http://www.nber.org/papers/w11424
L1  - http://www.nber.org/papers/w11424.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

Simon Johnson
MIT Sloan School of Management
100 Main Street, E52-562
Cambridge, MA 02142
Tel: 617/290-9618
Fax: 617/253-2660
E-Mail: sjohnson@mit.edu

Todd Mitton
Marriott School
Brigham Young University
684 TNRB
Provo, UT 84602
Tel: 801/422-1763
E-Mail: todd.mitton@byu.edu
AB  - We study the determinants of vertical integration in a new dataset of over 750,000 firms from 93 countries. Existing evidence suggests the presence of large cross-country differences in the organization of firms, which may be related to differences in financial development, contracting costs or regulation. We find cross-country correlations between vertical integration on the one hand and financial development, contracting costs, and entry barriers on the other that are consistent with these "priors". Nevertheless, we also show that these correlations are almost entirely driven by industrial composition; countries with more limited financial development, higher contracting costs or greater entry barriers are concentrated in industries with a high propensity for vertical integration. Once we control for differences in industrial composition, none of these factors are correlated with average vertical integration. However, we also find a relatively robust differential effect of financial development across industries; countries with less-developed financial markets are significantly more integrated in industries that are more human capital or technology intensive.
ER  -