Vertical Integration Dynamics to Innovate in Technology Business

1996

Journal of the European Economic Association, 2010

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.

International Journal of Services Technology and Management, 2002

In 1981 the Energy Systems Program at the International Institute of Applied Systems Analysis (IlASA) published five scenarios of global energy demand and supply for the period 1975-2030. At least two of them, the high and low scenarios, are still quoted today. This paper analyses how accurately the IlASA scenarios of 1981 captured the actual development during the first 15 years of their time horizon. Those parts of the scenarios that refer to developments still in the future are also compared with current views of the long-term development of the global energy system as expressed in recent results collected by the International Energy Workshop (lEW). The comparisons show that the low scenario of 1981 carne closest to actual developments up to 1990. With the exception of nuclear energy, its further projections fall well within the range of today's global energy scenarios.

Strategic Management Journal, 1986

c Summary This paper contrasts the vertical integration strategies of 192firms in the presence of diverse environtnental and strategic forces to suggest how successful uses of vertical integration differ from less successful ones. Briefly, firms which did not use vertical integration as effectively transferred more goods and services internally, and they did so more often under adverse industry conditions.

Information

Vertical integration, also known as make-or-buy, defines whether activities are conducted by company or provided by external parties. There are different models to support decision making for vertical integration in the literature. However, they ignore the uncertainty aspect of vertical integration. As a strategic decision, vertical integration is multidimensional and less frequent. This study contributes a new data-driven model that includes all these characteristics of vertical integration decisions. In this study, a methodology is suggested that benefits from the models in the literature and assesses the results with data obtained from real IT cases. Different methodologies were followed to reach a model that accurately predicts make-or-buy decisions in IT projects at a retail company. Firstly, three different knowledge-based generic models derived from the literature were applied to predict decisions for twenty-one different make-or-buy cases in IT. The highest accuracy rate rea...

For the past few years, several big companies have taken actions to gain more control over their supply chains. Against the popular trend of outsourcing, they tend to go back to gain a higher level of vertical integration. Just as outsourcing once raised challenges to global management, the revival of vertical integration sure brings benefits as well as new challenges. Motivated by this recent phenomenon, this paper investigates the influences of strategic choices on the change of vertical integration level and the performance implication of such changes. The findings support the cost-driven concern of the decisions on vertical integration level changes and certain performance benefits that the changes would bring to the companies.

Organization Studies, 1990

This paper contributes to research into the strategy-environment relationship, especially looking at the issue of vertical integration. It aims at a synthesis of process and content approaches to strategic change on the level of the organization's dominant group. The key factor is uncertainty, which will be defined as the gap between perceptual competence of the dominant group and environmen tal difficulty. After presenting a typical vertical integration case, the vertical integration literature is surveyed. Next, a framework of strategy-making under uncertainty serves as a vehicle to formulate some propositions on the formation of vertical integration strategy.

IO: Firm Structure, 2002

Patent citations are extensively used as a measure of patent quality. How­ever, counting citations does not account for the fast that citations corne from patents of different qualities, and that some citations are of a higher quality than other citations. We propose and develop a citation index which takes into account the cumulative quality of the citing patents. We apply this index to the 2,139,314 utility patents granted in the U.S. between 1975 and 1999. We study the properties of this index by year and by technological category, and analyse the links between patents.Abstract:Patent citations are extensively used as a measure of patent quality. How­ever, counting citations does not account for the fast that citations corne from patents of different qualities, and that some citations are of a higher quality than other citations. We propose and develop a citation index which t akes into account the cumulative quality of the citing patents. We apply this index to the 2,139,314 uti...

Industrial and Corporate Change, 2008

In this paper we present a history-friendly model of the changing vertical scope of computer firms during the evolution of the computer and semiconductor industries. The model is "history friendly", in that it attempts at replicating some basic, stylized qualitative features of the evolution of vertical integration on the basis of the causal mechanisms and processes which we believe can explain the history. The specific question addressed in the model is set in the context of dynamic and uncertain technological and market environments, characterized by periods of technological revolutions punctuating periods of relative technological stability and smooth technical progress. The model illustrates how the patterns of vertical integration and specialization in the computer industry change as a function of the evolving levels and distribution of firms' capabilities over time and how they depend on the co-evolution of the upstream and downstream sectors. Specific conditions in each of these markets -the size of the external market, the magnitude of the technological discontinuities, the lock-in effects in demand -exert critical effects and feedbacks on market structure and on the vertical scope of firms as time goes by.

2015

Most prior research has focused on vertical integration or strategic outsourcing in isolation to examine their effects on important performance outcomes. In contrast, we focus on the simultaneous pursuit of vertical integration and strategic outsourcing. Our baseline proposition is that balancing vertical integration and strategic outsourcing in the pursuit of taper integration enriches a firm’s product portfolio and product success, and in turn contributes to competitive advantage and thus to overall firm performance. We derive a set of detailed hypotheses, and test them on a unique and fine-grained panel of longitudinal data documenting over 3,500 product introductions in the global microcomputer industry. The results provide strong support for the notion that carefully balancing vertical integration and strategic outsourcing when organizing for innovation helps firms to achieve superior performance. Copyright 2006 John Wiley & Sons, Ltd. A long and venerable tradition of cross-di...