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Vertical Integration

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The Palgrave Encyclopedia of Strategic Management

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Abstract

Vertical integration, in which one company owns and controls two or more stages of a supply chain, can have many causes, including avoiding contractual difficulties (high transaction costs), remedying capability deficits and achieving informational efficiencies. Sometimes vertical integration that is justified when intermediate markets are underdeveloped becomes burdensome once vigorous competition emerges for provision of the intermediate goods. A general guideline is that, from a strategic management perspective, the assets in the ‘supply’ chain that are most critical to own and control, subject to certain conditions, are those that are not readily available in the market and are difficult to replicate. These can be thought of as ‘bottleneck assets’.

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Authors and Affiliations

  1. Berkeley Research Group, LLC, 2200 Powell Street, Suite 1200, Emeryville, CA, 94608, USA

    David J. Teece

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  1. David J. Teece
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Correspondence to David J. Teece .

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Editors and Affiliations

  1. Stanford University , Stanford, California, USA

    Mie Augier

  2. Tusher Ctr Intellectual Capital, University of California Tusher Ctr Intellectual Capital, Berkeley, California, USA

    David J. Teece

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Teece, D.J. (2016). Vertical Integration. In: Augier, M., Teece, D. (eds) The Palgrave Encyclopedia of Strategic Management. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-94848-2_452-1

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  • DOI: https://doi.org/10.1057/978-1-349-94848-2_452-1

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  • Publisher Name: Palgrave Macmillan, London

  • Online ISBN: 978-1-349-94848-2

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