EFFECTS OF BACKWARD INTEGRATION STRATEGY ON ORGANIZATIONAL PERFORMANCE

ABSTRACT

The firms’ diversification strategy choices and their impact on corporate performance have been the center of attention both empirically and theoretically in the fields of strategy and finance for more than 30 years. However, in general, previous studies have analyzed the integration- performance relationship without differentiating the industries that the firms were operating in, but rather the samples were pooled across industries. The aim of this paper is to investigate the performance effects of backward, horizontal, unrelated integration and undiversification strategies. Empirical evidence shows that horizontal (related) integrated companies are outperforming the corporate performance of unrelated diversified firms, and the structure of the market, the level of concentration have varying effects on performance for each type of industry. the Nestle has the highest average performance measure, and the empirical results underline the significant and positive effect of the horizontal integration strategy for the Nestle and manufacture of machinery and equipment industries that were subject to be tested.