Environmental uncertainty and forward integration in marketing: theory and meta‐analysis

Abstract

PurposeThis paper aims to present a meta‐analysis to test the competing hypotheses that arise from structural contingency theory (SCT) and transaction cost analysis (TCA) about how environmental uncertainty affects the strategic marketing policy of forward vertical integration (VI).Design/methodology/approachThe meta‐analysis focuses on directional hypothesis tests rather than effect sizes in a set of 84 tests drawn from 29 published studies. It employs the C‐OAR elements of Rossiter's C‐OAR‐SE framework to validate construct definitions and their measures within these studies.FindingsAlthough the results confirm the TCA hypothesis that asset specificity favours forward VI, the results for the effect of environmental uncertainty on forward VI do not favour either of the two competing hypotheses, but instead show that methodological orientation, international context, and historical time period moderate effects across studies and tests.Research limitations/implicationsThe findings imply that the relative ability of SCT and TCA to predict the effect of environmental uncertainty on forward VI in marketing may reflect real historical patterns of integration activity as a response to uncertain environments. In particular, in a new economy characterised by globalisation and rapid technological change, an increasing number of industries may face levels of uncertainty so high that they are increasingly less manageable through forward VI, a situation that broadly though tentatively favours the SCT prediction.Originality/valueSince no single empirical study has explicitly tested the implied competing uncertainty hypotheses from SCT and TCA, and since published meta‐analyses of VI have only considered the TCA hypothesis and never the competing SCT hypothesis and have in every instance pooled studies of backward and forward VI, this study develops a meta‐analysis for this purpose.