Work

Vertical or horizontal: optimal integration strategy under separation of ownership and control

Year: 2022

Type: article

Abstract: This study proposes a framework to analyze the strategic value of integration, when separation of ownership and control is considered.According to this framework, we investigate the optimal integration strategy in different control distribution and discuss how external market influences the best strategic choice.Beside theoretical analysis, we also provide evidence from Chinese listed firms to validate our research.The key results of our study show that first, unintegrated strategy works best, if the level of controlownership disparity is extremely high.Second, in general, vertical strategy is more appropriate for substitute markets, while horizontal strategy may bring more benefits in a highly complementary market.Third, the impact of integration strategy on a firm's performance is negatively moderated by control-ownership disparity.However, this moderate effect may be weakened by market structure.Our results provide a new and comprehensive perspective for understanding the inconsistent results from previous studies.Moreover, the analysis in this study also highlights a firm's strategic decision and market regulation policy.

Source: Economic Research-Ekonomska Istraživanja

DOI: 10.1080/1331677x.2022.2097104

Authors: Yang Yang, Ling Yan, Jing Gu

Institutions: Southwestern University of Finance and Economics, Sichuan University

Language: English

Topic: Merger and Competition Analysis

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: gold

Estimated APC paid: $944

Funders: National Natural Science Foundation of China, Humanities and Social Science Fund of Ministry of Education of China