Vertical Integration, Firm Boundaries, & Business Models

Abstract

The goal of this research project is to contribute to a better understanding of the theoretical frameworks that explain firm boundary choices. Although firm boundaries are a broad and heavily researched topic, there is no comprehensive understanding of why companies choose to conduct certain activities themselves while at the same time relying on external partners for other activities. Although some decisions can be understood through Transaction Cost Economics and others can be understood from the Resource-Based-View and other constructs, none of these existing frameworks are able to explain all decisions at all times. Even when combining the frameworks, gaps remain in which a specific choice of a firm cannot be fully understood. In addition to better understanding the strengths, weaknesses, and gaps in the various existing frameworks, this thesis will try to analyze the potential of the emerging business model framework in helping to supply a more complete explanation for the various paths firms take. By comparing four different direct competitors within the automotive safety industry, this research project tries to identify the background and motivations on the various vertical integration decisions made by each of the companies. When comparing the four firms, specific attention was given to identifying polar-type cases in which two firms either made opposite decisions, the same decisions at different points in time, or where a single firm chose to shift their boundaries. By identifying these polar cases and deeply analyzing the environment in which the decisions were made, a better understanding of the gaps and weaknesses in the existing frameworks could be exposed. Ultimately, the business model framework was introduced as offering a potential means of closing these gaps and offering a more holistic explanation of the firms’ choices. By recognizing that the four firms pursued individual business model designs, the potential for using this new framework to better understand firm boundaries could be explored. Overall, an explanation based on the additional business model framework was successful in helping to better understand some of the strengths and weaknesses of the existing frameworks, and offers a significant opportunity for further research into firm boundaries.

Date of Award	1 Aug 2018
Original language	English
Awarding Institution	The University of Manchester
Supervisor	Silvia Massini (Supervisor) & Mark Healey (Supervisor)