This study evaluates the importance of product differentiation as a determinant of vertical integration in firms. The proposed model also controls for known determinants of integration, such as transaction costs and firm-level capabilities. By identifying transaction-, firm- and strategy-level determinants, we derive testable predictions about the vertical integration decision. To test these predictions we analyze the Rioja wine industry, using a representative sample of 187 firms. Our paper concludes that reaching judicious vertical integration decisions requires a thorough analysis of some very diverse aspects, especially those related to mitigating opportunism, dealing with unforeseen contingencies and product differentiation.
Fernández-Olmos, M., Dejo-Oricain, N., & Rosell-Martínez, J. (2016). Product differentiation strategy and vertical integration: an application to the DOC Rioja wine industry. Journal of Business Economics and Management, 17(5), 796-809. https://doi.org/10.3846/16111699.2013.815130
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