Impact of Vertical Mergers on Industry Profitability: An Empirical Evaluation

Impact of Vertical Mergers on Industry Profitability: An Empirical Evaluation Vertical integration has become an important business strategy to respond to the needs of a consumer-driven marketing system. Although one of the perceived benefits of vertical ownership integration is improved profitability of the integrated firm, empirical literature mostly ignores this issue. Using a sample of U.S. food manufacturing industries, this study examines the impact of vertical mergers on profitability. Findings show that vertical mergers negatively impact profits. This may be due to the failure of vertical mergers to create differential advantages, such as cost savings, for the integrated firm. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Impact of Vertical Mergers on Industry Profitability: An Empirical Evaluation

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2002 by Kluwer Academic Publishers
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1023/A:1013310929902
Publisher site
See Article on Publisher Site

Abstract

Vertical integration has become an important business strategy to respond to the needs of a consumer-driven marketing system. Although one of the perceived benefits of vertical ownership integration is improved profitability of the integrated firm, empirical literature mostly ignores this issue. Using a sample of U.S. food manufacturing industries, this study examines the impact of vertical mergers on profitability. Findings show that vertical mergers negatively impact profits. This may be due to the failure of vertical mergers to create differential advantages, such as cost savings, for the integrated firm.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Oct 13, 2004

References

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