Configuration of value chain activities: The effect of pre-entry capabilities, transaction hazards, and industry evolution on decisions to internalize

Abstract

We integrate insights from organizational capabilities, organizational economics, and industry evolution to examine industry entrants' boundary choices about value chain activities and test hypotheses in 1978-2009 data from a sample of U.S. bioethanol producers. We find support for our predictions that transaction hazards, decomposed as either enduring or transient over the stages of industry evolution, are positively associated with the choice to internalize value chain activities. Pre-entry experience in an activity increases the likelihood of its internalization and reduces the effect of enduring transaction hazards on the internalization choice. Importantly, we also distinguish between f..