The Choice of Organizational Form: Vertical Financial Ownership versus Other Methods of Vertical Integration (Joe Mahoney, SMJ 1992). I-Chen Wang. Vertical Integration. Mkt. Intermediate forms of VC. VFO. Distinction between Concepts. Vertical Financial Ownership (VFO henceforth)
Vertical Integration Ownership versus Other Methods of Vertical Integration (Joe Mahoney, SMJ 1992)
Intermediate forms of VC
VFODistinction between Concepts
In the absence of agency theory and transaction costs, vertical financial ownership and vertical contracting are equivalent governance structures for achieving corporate objectives.
Research question: When market mechanisms are sufficient, when intermediate forms of vertical contracting become necessary, and when vertical financial ownership becomes the preferred governance structure
----VFO is not sufficient to meet those considerations!
Non-separability, programmability (agency theory Information asymmetry), specificity (TCE) are three factors to suggest the vertical ownership decision