Kathryn Rudie Harrigan

Vertical Integration and Corporate Strategy

Proposing a new look at vertical integration and the dimensions that comprise it, this study develops a framework for predicting when firms use make-or-buy decisions. The strategic business units (SBUs) studied made fewer products and services in-house and firms were engaged in fewer stages of processing when demand was highly uncertain than they did when demand was more certain. Internal transfers from upstream or to downstream business units were more numerous when synergies with adjacent SBUs were substantial than when they were not. Some competitive imitation of vertical integration strategies occurred, and firms with high market shares sought higher ownership stakes in stages of processing adjacent to those markets. Vertical integration involves a variety of decisions concerning whether corporations, through their business units, should provide certain goods or services in-house or purchase them from outsiders instead. Corporations considering vertical integration - one of the first diversification strategies firms consider as they progress from being single-business companies - must make decisions regarding the autonomy of these business units. Most research concerning vertical integration has assumed that savings in the costs of transactions that integration accomplishes supersede autonomy needs of strategic business units (SBUs). According to such an assumption, integrated firms will transfer all of their relevant goods and services to adjacent, in-house business units. However, this paper argues for a dynamic concept of vertical integration in which,the key to effective management is understanding when corporate needs for intrafirm cooperation might take precedence over the concerns of autonomous business units, and when the opposite might be true. The theory developed in this study incorporates the forces of competitive settings and corporate (as well as business-level) strategy needs in a suggested framework for appropriate use of vertical integration. Developing this strategy framework introduces several new dimensions that characterize all vertical integration strategies. My intent is to bridge the gap between economic treatments of vertical integration and activities observed in the histories of several industries; the next section briefly sketches the dimensions of this gap.

End-game Strategies for Declining Industries

As early as 1948, when researchers discovered the ‘transistor effect’, it was evident that vacuum tubes in television sets had become technologically obsolete. Within a few years, transistor manufacturers were predicting that by 1961 half the television sets then in use would employ transistors instead of vacuum tubes.

Deterrents to Divestiture

The deterrent effect of exit barriers, industry structural traits and competitive posture investments, on the firms ability to divest a failing business with ease is explored, using analyses of th...

Exit Barriers and Vertical Integration

When exit barriers trap firms in an industry, the result is destructive competition and reduced profits (Harrigan, 1981; Porter, 1976). Mobility barriers often prevent firms from changing their str...

Numbers and Positions Of Women Elected to Corporate Boards

The article presents a study which investigated the number and positions of women elected to corporate boards in the United States from the period 1971 to 1980. The author investigated the composit...

Exit Decisions in Mature Industries

Measures of exit barriers and inducements to exit are constructed in a study of exits from nondeclining industries. Findings are contrasted with those from a study of exits within declining industr...

Strategies for Intrafirm Transfers and Outside Sourcing

In this article the author discusses research she carried out that examined the vertical integration strategies for corporations. She notes that the internal purchasing strategies for companies var...

The Changing Face of Private Equity:How Modern Private Equity Firms Manage Investment Portfolios

This article presents a comprehensive analysis of private equity management models and outlines two distinct models: one being a traditional financial investor with focus on financial engineering and selective changes in the governance model of portfolio companies, the other representing a modern form of private equity seeking value creation through active ownership. Active investors are able to significantly outperform more traditional financial investors by realizing the proceeds of intervention in strategic decision making, while avoiding the costs of “corporate infrastructure.”

Do horizontal relationships matter to production and operations managers

This paper shifts the focus of production, operations and supply chain management business relationships from the vertical to the horizontal side and calls for more research on this issue. The main intent is to provide managerially oriented arguments regarding the linkages between the achievement of operations-related goals and decisions related to horizontal business relationships. Specifically, we address the following research question: Does a linkage exist between production and operations objectives and the decisions a company makes about horizontal agreements, particularly horizontal governance mode choice? To answer this research question, we develop literature-based hypotheses and collect data from 4316 agreements of mergers and acquisitions and alliances and joint venture announced and completed between 2000 and 2010 by 88 of the first 100-ranked members of the Fortune 500 in the year 2000. We then test the hypotheses through a binary logistic regression model. This study brings interesting results and findings in terms of how and why production management considerations should play a crucial role in the type of strategic decisions that are usually reserved for finance and strategy managers. Operations managers should be fully involved in such decisions if they are to be well acquainted about how their choices impact on operational objectives.

Using a distance measure to operationalise patent originality

ABSTRACT We introduce a distance measure to operationalise Trajtenberg, Henderson, and Jaffe’s [1997. “University Versus Corporate Patents: A Window on the Basicness of Invention.” Economics of Innovation and New Technology 5: 19–50] originality construct (an ex-ante indicator of firms’ technological capabilities). Our measure captures (1) technological diversity, (2) technology distance from patent antecedents, and (3) degree of novelty per each patented innovation. The V-score measure uses the Derwent World Patent Index system to classify technologies hierarchically – making similarities and differences pronounced. Power is gained by using all of the technology-classification codes describing a focal patent’s claims when calculating whether its technology space was incrementally different or radical from those of its antecedent patents (and identifying whether its technology-class code combinations were commonplace at the time when the patent application was made). Our V-score’s prediction of firms’ performance is contrasted with Hall, Jaffe, and Trajtenberg’s [2001. Hall, B. H., A. B. Jaffe, and M. Trajtenberg. 2001. The NBER Patent Citations Data File: Lessons, Insights and Methodological Tools. NBER Working Paper No. 8498] Herfindahl measure of the same originality construct. Results indicate that the distance measure of technological content produces differently signed results when evaluating patents’ performance effects or predicting a firm’s trajectory.