Authority and Performance in Vertical Relations: Satellite-tracked Evidence
Abstract: Authority is characterized by the right to give orders and hold the residual claims of the firm. Using satellite-tracked real-time data on the operations of a vertically integrated fishing firm’s own ships and its long-term supplier ships, this paper studies the effect of increased control after the acquisition of those suppliers. The results suggest an increase in fishing effort and speed, an improved coordination with downstream plants, higher ship productivity, and higher downstream product quality brought about by control. Evidence consistent with improved fleet deployment and coordination, and inconsistent with other mechanisms, is provided.