Backward vertical integration in the Swedish forest sector — six case studies

Abstract

In this paper arguments for and against backward vertical integration, i.e. integration from pulp or saw mills to timberland ownership, are studied. Three interviews are made with pulp and paper Chief Executive Officers and three with lumber company CEOs. The theoretical background is taken from transaction cost theory, a theory that explains, among other things, why vertical integration exists. As the main reason for backward integration, the pulp and paper companies’ CEOs stressed the possibility to affect prices while the lumber companies stressed secure deliveries. All three presidents of the lumber companies expressed a wish to buy more timberland, i.e. to become more backward integrated. Two of the presidents of the pulp and paper companies expressed an interest in selling timberland far away from the mills and buying timberland closer to the mills.KeywordsTimberlandOwnershipScopetransaction costsroundwood market