Vertical integration and profitability of the agrifood industry in an economic crisis context

  1. Grau, Alfredo J. 1
  2. Reig, Araceli 1
  1. 1 University of Valencia, Faculty of Economics, Dept. Corporate Finance. Avda. de los Naranjos, s/n. 46022 Valencia
Revista:
Spanish journal of agricultural research

ISSN: 1695-971X,  2171-9292

Año de publicación: 2015

Volumen: 13

Número: 4

Tipo: Artículo

DOI: 10.5424/SJAR/2015134-7487 DIALNET GOOGLE SCHOLAR lock_openDialnet editor

Otras publicaciones en: Spanish journal of agricultural research

Resumen

In a setting of economic and financial crisis, most companies experienced a reduction in their profitability. Thus, our study allows us to identify vertical integration strategies developed by companies to overcome the crisis. This paper is aimed at unveiling the determining factors of the profitability of Spanish agrifood firms, depending on whether they are backwards vertically integrated or not. In order to attain our objective, we implemented a first difference regression model. The main contributions of the article lie in the incorporation of a variable that distinguishes integrated firms from the rest and the separate analysis of the two groups of firms. The results suggest that firms that seek to differentiate themselves, either through offering a specific product or through providing higher quality with a view to maintaining their reputation, are more likely to adopt vertical integration due to the higher transaction costs of relations with suppliers. The grouping carried out in this study is shown to be highly relevant as asset structure implies different strategies for actions aimed at increasing profitability.

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