Interorganizational Dependence and Forward Integration

This paper considers a business unit's propensity to forward integration in response to dependence on customers and turbulence of the environment. The analysis seeks to determine whether vertical integration patterns differ between three manufacturing sectors: consumer products, capital goods, and industrial supplies and components. The results suggest that customer dependence variables are important predictors of forward integration, while aspects of turbulence are not as important. The results also indicate various differences across the three sectors, suggesting that the motivation for forward integration varies with sector. The implications of the findings are discussed.