Three Essays on Vertical Organization and Firm Strategy

My dissertation encompasses three essays exploring the interplay between vertical organization and firm strategy.;The first study explores how a firm's market position shapes the design of vertical arrangements with suppliers. I develop a simple model showing that differentiated market positions increase quasi-rents in the face of supply hazards. As a consequence, firms competing from more differentiated market positions are also more willing to invest in contractual safeguards to mitigate these hazards. Analysis of trading relationships in the Costa Rican coffee industry provides strong empirical support for the main arguments. The findings also suggest that a complete understanding of contract duration and price premiums in supply relationships requires the integration of economizing and strategizing perspectives.;The second study turns to the implications of discrete forms of organization. In particular, this essay examines how vertical integration and geographic location affect a firm's ability to adapt to a severe demand shock. Drawing on a rich dataset of manufacturing firms in Spain, I show that while vertically-integrated firms performed better in 'steady state,' they suffered greater declines in the aftermath of the crisis. I also show that the performance difference is increasing in the level of agglomeration economies. These results thus highlight the interaction between organizational scope and location characteristics in determining firm performance outcomes.;The third study examines the connection between firm scope and geography in greater detail, looking at the extent to which vertical integration affects a firm's propensity to locate in dense industrial clusters. I argue that since greater vertical scope allows firms to be less dependent on location-based agglomeration economies, more vertically-integrated firms are less likely to choose dense industrial clusters as their production sites. I provide empirical support through analysis of a rich dataset of manufacturing plants established in Mexico by U.S. firms. This study thus provides important new evidence on how vertical scope decisions can shape subsequent strategic choices and, ultimately, firm performance.