Geographical Agglomeration as an Alternative to Vertical Integration

Geographical Agglomeration as an Alternative to Vertical Integration This paper provides empirical evidence of the relationship between agglomeration and vertical integration decisions. It contributes to the existing literature by first developing a conceptual framework that focuses on both opportunism risk and communication problems to explain how physical proximity among firms can be an alternative to internal organization. Second, this study tests this relationship through the use of firm-level data from 10,955 establishments in the Spanish meat industry. Results confirm that establishments located in agglomerated areas internally undertake fewer stages of the value chain. We also find that this relationship is weaker than expected and fades at distances greater than 2.5 km, which may be explained by the particular characteristics of this industry. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Geographical Agglomeration as an Alternative to Vertical Integration

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Publisher
Springer US
Copyright
Copyright © 2010 by Springer Science+Business Media, LLC.
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1007/s11151-010-9251-y
Publisher site
See Article on Publisher Site

References

  • Evidence on the role of firm capabilities in vertical integration decisions
    Argyres, N.
  • Knowledge flows through informal contacts in industrial clusters: Myth or reality?
    Dahl, M. S.; Pedersen, C. O. R.

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