Explaining vertical integration : transaction cost economics and competence considerations

Abstract

This study develops a conceptual model that explains vertical integration as a synthesis of transaction costs economics and the competence perspective. Our empirical results show that asset specificity and closeness to present competence are positively related to vertical integration, while tacit knowledge is negatively related to vertical integration. The empirical results indicate that the synthesis provides a more powerful framework for explaining vertical integration than each perspective may contribute alone.