55 Pages Posted: 31 Mar 2013 Last revised: 17 Sep 2017
Date Written: September 15, 2017
We examine vertical acquisitions and integration using product text linked to product vocabulary from the input-output tables. We find that the stage of innovation is important in understanding vertical integration. Firms in R&D intensive industries are less likely to become targets in vertical acquisitions or to vertically integrate, consistent with firms with unrealized innovation staying separate to maintain ex ante incentives to invest in intangible assets and retain residual rights of control. In contrast, firms in industries with patented innovation are more likely to vertically integrate, consistent with ownership facilitating commercialization after innovation is realized to reduce ex post holdup.
Keywords: Mergers and Acquisitions, Vertical Mergers, Vertical Integration
JEL Classification: G34
Suggested Citation: Suggested Citation
Frésard, Laurent and Hoberg, Gerard and Phillips, Gordon M., Vertical Acquisitions, Integration and the Boundaries of the Firm (September 15, 2017). Available at SSRN: https://ssrn.com/abstract=2242425 or http://dx.doi.org/10.2139/ssrn.2242425