Vertical integration, foreign multinationals and Stigler's hypotheses: An empirical test using Malaysian data

Nor Ghani Md Nor, Ahmad Zainuddin Abdullah, Khalil Nor

Research output: Contribution to journalArticle

6 Citations (Scopus)

Abstract

In this paper the hypotheses on motives for vertical integration as proposed by Stigler are empirically tested using a panel dataset from Malaysian manufacturing under both fixed-effects and random-effects specifications. Because the degree of multinational participation is expected to influence the results of the regression estimates, empirical tests are conducted with and without controlling for the effect of foreign firms' participation. Depending on model specifications, evidence is found in favor of Stigler's hypotheses where vertical integration is positively related to demand growth and industry concentration. This result is generally consistent with those found in other vertical integration studies. Significantly, the coefficient estimates of the growth variable are not significant and biased downwards if there is no control on the effect of foreign multinationals in the estimation process.

Original languageEnglish
Pages (from-to)257-274
Number of pages18
JournalAsian Economic Journal
Volume20
Issue number3
DOIs
Publication statusPublished - Sep 2006

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vertical integration
participation
manufacturing
firm
regression
effect
test
industry
demand
evidence

Keywords

  • Foreign multinationals
  • Transaction costs
  • Vertical integration

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Development

Cite this

Vertical integration, foreign multinationals and Stigler's hypotheses : An empirical test using Malaysian data. / Md Nor, Nor Ghani; Abdullah, Ahmad Zainuddin; Nor, Khalil.

In: Asian Economic Journal, Vol. 20, No. 3, 09.2006, p. 257-274.

Research output: Contribution to journalArticle

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