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Vertical integration in the real estate sector: three Swedish case studies

Vertical integration in the real estate sector: three Swedish case studies PurposeThe purpose of this paper is to explain why some real estate companies choose to have a vertically integrated structure, instead of specializing in only stage of the production chain.Design/methodology/approachThe first stage of the research was an extensive literature review to generate hypotheses. A case study method was then chosen, as more detailed knowledge about the companies were judged to be needed to evaluate the different hypothesis. Documents about the companies were studied and interviews carried out.FindingsIn the studies cases, there is no support for theories related to vertical integration as a way to monopolize a market and only marginal support for theories that focus on contracting problems related to the so called hold up problem. The most important factors for the companies were that vertical integration gives information and more options that are important in small number bargaining situations. The companies bargaining power increases when they are better informed about, e.g. costs and profits in nearby activities, and when they can use in-house units, if there are problems to find reasonable conditions on the outside market.Research limitations/implicationsThe main limitation is that only three cases were studied.Practical/implicationsThe study can be helpful both to companies that choose to integrate vertically and those that chose not to. There are similar problems related to information and bargaining power that needs to be handled.Originality/valueThis is the first study that test theories about vertical integration in the real estate sector. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of European Real Estate Research Emerald Publishing

Vertical integration in the real estate sector: three Swedish case studies

Journal of European Real Estate Research , Volume 10 (2): 16 – Aug 7, 2017

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1753-9269
DOI
10.1108/JERER-07-2016-0029
Publisher site
See Article on Publisher Site

Abstract

PurposeThe purpose of this paper is to explain why some real estate companies choose to have a vertically integrated structure, instead of specializing in only stage of the production chain.Design/methodology/approachThe first stage of the research was an extensive literature review to generate hypotheses. A case study method was then chosen, as more detailed knowledge about the companies were judged to be needed to evaluate the different hypothesis. Documents about the companies were studied and interviews carried out.FindingsIn the studies cases, there is no support for theories related to vertical integration as a way to monopolize a market and only marginal support for theories that focus on contracting problems related to the so called hold up problem. The most important factors for the companies were that vertical integration gives information and more options that are important in small number bargaining situations. The companies bargaining power increases when they are better informed about, e.g. costs and profits in nearby activities, and when they can use in-house units, if there are problems to find reasonable conditions on the outside market.Research limitations/implicationsThe main limitation is that only three cases were studied.Practical/implicationsThe study can be helpful both to companies that choose to integrate vertically and those that chose not to. There are similar problems related to information and bargaining power that needs to be handled.Originality/valueThis is the first study that test theories about vertical integration in the real estate sector.

Journal

Journal of European Real Estate ResearchEmerald Publishing

Published: Aug 7, 2017

References