Environmental Engineering Reference
In-Depth Information
According to our analysis, we observed sig-
nificant differences in vertical integration levels
for Health Care and Industrials industries. For
α = 0.05, sustainable companies in Health Care
and Industrials industries present higher verti-
cal integration level than their non-sustainable
counterparts do. On the other hand, we could
not state a significant difference in the vertical
integration level for other seven industries. Table
2 presents the p-values associated to each industry
with descriptive statistics that are calculated with
Wilcoxon Rank Sum Test.
Both Basic Materials and Oil & Gas industries
present higher level of vertical integration for
sustainable and non-sustainable companies. On
the contrary, the vertical integration level of
Consumer Goods and Consumer Services indus-
tries are quite low for both sustainable and non-
sustainable companies. Most of the companies
have zero vertical integration level because they
operate generally in only one industry. Because
I-O tables do not provide information for these
industries, we have to omit retail, transportation,
and warehousing industries in our calculations.
This is also another reason for obtaining zero
vertical integration level. In Consumer Goods and
Consumer Services industries, most of the com-
panies have distribution and transportation seg-
ments that we cannot consider in our calculations.
The vertical integration level in Technology
industry is low for both sustainable and non-sus-
tainable companies. As noted in Fine & Whitney
(1996), these computer and software companies
started to be disintegrated starting from mid 1980s
because of the product and industry conditions.
Therefore, this low vertical integration level is
due to industry and product effects. Fan & Lang
(2000) also observed a high vertical integration
level in Chemical industry (i.e. Basic Materials
industry). Therefore, the high vertical integration
level of sustainable and non-sustainable compa-
nies in Basic Materials industry may be because
of the industry effect as well.
At first glance, since we were expecting higher
vertical integration level for sustainable compa-
nies in more industries, the result of the study is
surprising given that the literature hypothesize a
higher level of vertical integration for sustainable
companies. However, we understand that, the ef-
fect of industry and product on vertical integration
level cannot be negligible. The results of this study
do not conflict with literature; contrarily, it sup-
ports both the scholars that emphasize the factors
affecting make-buy decisions and the scholars
that propose higher integration for sustainable
companies. In the next section, we present more
discussion on the Fan & Lang method and data
sources.
DISCUSSIONS
Our analysis has some limitations that deserve
further research. Fan & Lang's method is an I-O
based vertical measurement index. Because of
limited information in I-O tables, this method
could not calculate the vertical integration level of
some companies that are operating mainly in retail,
transportation, and warehousing industries. In a
parallel study we evaluated the I-O based vertical
integration measures and concluded that Fan &
Lang's method is a preferable method compared
to other methods, Davies and Morris (1995) and
Hortacsu and Syverson (2009). There are other
vertical integration measurement methods that are
not I-O based. However, Hutzschenreuter & Gröne
(2009) assessed the influence of foreign competi-
tion on vertical integration strategies of U.S. and
German companies. They used the value-added
to sales approach of Adelman (1955), adjusted
value-added to sales ratios developed by Buzzel
(1983) and Tucker and Wilder (1977), and Fan
and Lang (2000) methods in their analyses. They
compared these methods and concluded that the
input-output based Fan and Lang method is more
advantageous than the other value-added-to-sales
based methods.
