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Vertical Integration

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Encyclopedia of Law and Economics

Definition

Vertical integration refers to the organization of successive stages of production or distribution – i.e., a supplier and a retailer – within a single firm. Two aspects are relevant in the definition of vertical integration: (i) the ownership or control by the same firm over the successive stages of production or distribution process and (ii) the substitution of external with internal exchanges.

Vertical integration can be full or partial. Under the first aspect, i.e., ownership or control, integration is full (partial) if the firm acquires all (part of) the shares in a vertically related firm. Under the second aspect, i.e., the internalization of exchanges, full vertical integration means that the entire output of an upstream unit is employed in a downstream unit or the entire quantity of an intermediate input in the downstream unit is obtained from the upstream process, while partial integration means that most of the output of the upstream unit is employed as most of the...

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Author information

Authors and Affiliations

  1. University of Tuscia, Viterbo, Italy

    Giuseppina Gianfreda

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  1. Giuseppina Gianfreda
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Correspondence to Giuseppina Gianfreda .

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Editors and Affiliations

  1. Montpellier, France

    Alain Marciano

  2. Dept DiGSPES, Univ del Piemonte Orientale Dept DiGSPES, Alessandria, Italy

    Giovanni Battista Ramello

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Gianfreda, G. (2020). Vertical Integration. In: Marciano, A., Ramello, G. (eds) Encyclopedia of Law and Economics. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-7883-6_672-2

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  • DOI: https://doi.org/10.1007/978-1-4614-7883-6_672-2

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  • Print ISBN: 978-1-4614-7883-6

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Chapter history

  1. Latest

    Vertical Integration
    Published:
    05 August 2020

    DOI: https://doi.org/10.1007/978-1-4614-7883-6_672-2

  2. Original

    Vertical Integration
    Published:
    12 June 2017

    DOI: https://doi.org/10.1007/978-1-4614-7883-6_672-1

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