Changing Vertical Integration Strategies under Pressure from Foreign Competition: The Case of US and German Multinationals

This study contributes to the emerging body of research into the influence of foreign competition on firm scope. Industrial organization economics, the resource-based view of the firm, and transaction cost economics consistently predict vertical de-integration in the face of intensifying pressure from imports and foreign direct investment. We show this was the case for 407 US firms between 1987 and 2003. Results for a panel of 95 German firms reveal a similar reaction to pressure from an increase in imports, but show no reaction to increased exposure to incoming foreign direct investment during the same time frame.

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