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An index of vertical integration is constructed as a tool to examine how the average level of vertical integration has changed over time. The hypothesis that if vertical integration can lower costs or reduce risks, more firms will integrate vertically is subjected to an empirical test using the Vertical Industry Connection index. A randem sample of firms is selected from the COMPUSAT data base. The results support the contention that vertical integration has increased in contrast with Laffer's findings. 17 references, 10 figures, 3 tables.
R.J. Maddigan (Sat,) studied this question.