Micro-determinants of vertical integration: Evidence from China

The state‐of‐the‐art literatures, industrial economics, transaction cost theory, and real options theory explain vertical integration (VI) from the perspective of industrial characteristics. However, even within the same industry, VI greatly differs from firm to firm. This indicates that there may be firm‐level (micro) determinants in VI. In an effort to probe into firm‐level (micro) determinants of VI, we analyze data on the publicly listed firms of the electronics industry in China from 1998 to 2008. We find that between the two micro determinants, firm‐oriented determinants consist of three groups of factors of value–profitability, growth, and risk–but insider‐oriented determinants do not significantly impact VI.