Trends in Vertical Integration in the U.S. Manufacturing Sector

Although industrial organization specialists generally list the degree of vertical integration as one of the important elements of market structure, relatively little empirical research has been devoted to measuring the extent of, and trends in, vertical integration. M. A. Adelman's pioneering work in the mid-1950s and M. Gort's widely cited research on diversification and integration are the primary exceptions of this generalization. This paper reviews the concept of vertical integration and develops a measures which is used to analyze the trend of vertical integration for the four-digit manufacturing industries between 1954-1972 and for a sample of manufacturing firms over the period of 1953-1973. We conclude by testing some hypotheses concerning determinants of interfirm and interindustry differences in the trend of vertical integration.