Formulating vertical integration strategies

A framework is proposed for developing effective vertical integration strategies. It was developed by synthesizing the theoretical foundations established by the industrial economics and strategic management studies with firms' observed behaviors. It thus suggests a new way to perceive vertical integration and the forces that influence firms' choices regarding vertical linkages. The framework develops normative propositions concerning which generic vertical strategies might be more suitable under different competitive circumstances; it uses examples of firms' successes or failures in using vertical integration to indicate how traditional notions of this strategy might be altered to reflect effective industry practices. If the framework is valid, strategists could formulate better hybrid vertical integration strategies by recognizing the hypothesized effects of these forces on the industries that might be connected.