ABSTRACT
This chapter sets out the strategic delegation view on vertical relations. Divisionalization protects the value of incumbency by deterring entry in industries where divisionalization is cheaper to the incumbent than to potential entrants. The perspective offered by the theory of multidivisional firms retains the entry-deterring motive but enriches it with the commitment motive, whereby firms going multidivisional may profit from the mix-and-match of intra-firm competition and market competition. The building blocks of the extant discussion about vertical integration vs separation in connection with strategic delegation can be found in Bonanno and Vickers. The possibility of generating a range of theoretical models delivering asymmetric vertical structures across the population of firms is highly appealing, because casual observation regularly confirms that enterprises with different divisional arrangements operate in the same industry.
