Antecedents of vertical integration: Transaction cost economics and resource-based explanations

Abstract

This article focuses on antecedents of vertical integration. A model of vertical integration derived from transaction cost economics and the resource-based view is tested empirically with data from the mechanical maintenance services market in the hydroelectricity industry. The 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 positive interaction effect between asset specificity and closeness to present competence on vertical integration is also supported, indicating that the decisions on insourcing and outsourcing can benefit from using transaction cost economics and the resource-based view in tandem.