The motives for vertical integration in nineteenth-century Mississippi lumber companies

Abstract

In the nineteenth century, the lumber companies were among the most technologically advanced enterprises in the Southern States of America, relying as heavily on capital as on labour. A critical factor in the success of these companies was the need to secure an ample supply of raw materials, a situation that was solved by backward vertical integration, particularly the purchase of timberland which provided them with direct control over supplies. These companies also vertically integrated forward, especially into distribution. Though the reasons for integration, whether backward or forward, varied from company to company and from situation to situation, it enabled them to invest in production facilities which, through mass production, led to the realization of cost advantages of both scope and scale. It would appear that the successful early lumber companies undertook vertical integration for reasons which are akin to those espoused by economic theoreticians.