Increasing Vertical Integration in Brazilian Orange Juice Sector After 1990: Power and Transaction Costs
Abstract: The presence of juice processors within citrus growing activity is a characteristic in Brazilian orange juice sector since its beginning but, during 1990s, this presence became increasingly large. No dramatic changes in transaction costs were observed, but accusations of market power exertion of juice processors and antitrust actions marked the period. More importantly, backward vertical integration of juice processors was free and citrus growers faced barriers to forward vertical integration during the period. The research question is: how power affects vertical integration choice in orange juice sector after 1990? The main hypothesis posits that power has an important role in the economic organization of orange juice sector, but it is simultaneously found with economizing drivers. Using panel data analysis, a sample of the five largest juice-processing firms contemplated a 15-years period, from 1993 to 2007. Results indicate asset specificity and power as the determinants of economic organization of orange juice sector. The study contributes to the investigations of the special cases in which power is relevant, indicating that the simultaneous consideration of power and efficiency should be the starting point of organizational analysis.
