How many firms in the adjacent stage?
Do transaction-specific investments necessary?
The greater the need for transaction-specific investments, the greater the advantages of VI
Is information evenly distributed across the stages?
The greater are information asymmetries, the greater the advantages of VI
Is there uncertainty over the period of the relationship?
The greater the uncertainty, the more incomplete is the contract and the greater the advantages of VI
How similar is optimal scale between the two stages?
The greater the dissimilarity, the less advantageous is VI
How strategically similar are the two stages?
Do capabilities in the adjacent stage need to be continually upgraded?
The fewer the number, the less advantageous is VI
Are profit incentives critical to performance?
The greater the need for high-powered incentives the greater the disadvantages of VI
Unpredictable demand reduces advantages of VI
Is market demand uncertain?
The greater the need for capability development the greater the disadvantages of VI
Is the adjacent stage highly risky?
VI tends to compound risk
Characteristics of the vertical relationship
Implications for VI
Vertical Integration v. Outsourcing: Key Considerations
Do transaction-specific investments necessary?
THE COSTS AND BENEFITS OF VERTICAL INTEGRATION
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