ABSTRACT
This introduction presents an overview of the key concepts covered in the subsequent chapters of this book. The book investigates the relationship between a firm's decision to integrate vertically and its research and development (R & D) strategy. It reviews the literature on vertical integration and presents a framework to analyze the costs and benefits of vertical integration. The theory of vertical integration has been studied in the context of the theory of the firm. The book investigates the theoretical basis for the main hypotheses, and analyses the hypotheses empirically. The empirical test featuring the assumptions and technique of the rational expectations hypothesis uses a dynamic simultaneous equation model with expectation variables and various time lags. The book presents the empirical evidence for the arguments. The evidence is based on a study of vertical integration and technological innovation in the US electronics industry.
