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Vertical Integration and Firm Productivity

26 Pages Posted: 25 May 2017  

Hongyi Li

UNSW Australia Business School, School of Economics

Yi Lu

National University of Singapore (NUS) - Department of Economics

Zhigang Tao

The University of Hong Kong - School of Business

Date Written: Summer 2017

Abstract

This paper uses three cross‐industry datasets from China and other developing countries to study the effect of vertical integration on firm productivity. Our findings suggest that vertical integration has a negative impact on productivity, in contrast to recent studies based on U.S. firms. We argue that in settings with poor corporate governance, vertical integration reduces firm productivity because it enables inefficient rent‐seeking by insiders.

Suggested Citation

Li, Hongyi and Lu, Yi and Tao, Zhigang, Vertical Integration and Firm Productivity (Summer 2017). Journal of Economics & Management Strategy, Vol. 26, Issue 2, pp. 403-428, 2017. Available at SSRN: https://ssrn.com/abstract=2972943 or http://dx.doi.org/10.1111/jems.12191

Hongyi Li (Contact Author)

UNSW Australia Business School, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

Yi Lu

National University of Singapore (NUS) - Department of Economics ( email )

1 Arts Link, AS2 #06-02
Singapore 117570, Singapore 119077
Singapore
65-65166834 (Phone)

HOME PAGE: http://ylu6.weebly.com

Zhigang Tao

The University of Hong Kong - School of Business ( email )

Meng Wah Complex
Pokfulam Road
Hong Kong
China
(852) 2857-8223 (Phone)
(852) 2858-5614 (Fax)

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