Firm Size, Innovation and Vertical Integration Incentives: The Case of Food Supply Chain

Abstract

This study aims to investigate and explore the relationship between vertical integration and the firm's innovativeness in food supply chain. For doing so, a two-stage least-squares model was used. It encompassed instrumental variables that attempt to describe the effective determinants of firm's vertical integration willingness.Results based on data concerning a set of 130 food-manufacturing firms, highlighted that vertical integration of a firm is strongly affected by internal incentives such as innovation rate and firm size. Moreover, it is simultaneously influenced by the economies of scale and some structure incentives. To conclude, results indicate globally that important and statistically significant differences exist across the studied firms and the small effective ones which acquire a high level of vertical integration.