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Vertical Integration and Performance in the United States Computer Hardware Industry

This study examines the relationship between firm performance and the vertical integration strategies of 50 U.S. computer hardware manufacturers. We propose that between-stage and within-stage vertical integration have differential effects on performance. Our findings indicate that in the computer hardware industry within-stage vertical integration is negatively related to performance. Between-stage integration is not associated with performance. These results suggest that the core extension benefits of within-stage integration may be outweighed by the costs to manage a wide breadth of activities in more than one value-added chain. The implications for future research are discussed.

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