Matching vertical integration strategies to competitive conditions

Abstract This paper contrasts the vertical integration strategies of 192 firms in the presence of diverse environmental and strategic forces to suggest how successful uses of vertical integration differ from less successful ones. Briefly, firms which did not use vertical integration as effectively transferred more goods and services internally, and they did so more often under adverse industry conditions. A frequent error was to undertake more integrated activities in‐house and engage in longer chains of processing from ultra‐raw materials to finished goods. Ironically, many of the vertically integrated firms that suffered adversity possessed the bargaining power needed to contract advantageously for goods or services, but accepted an overly risky ownership position unnecessarily by producing them, instead.