Vertical Integration and Internet Strategies in the Apparel Industry

Abstract

We explore the relationship between vertical scope and the ability to respond to a significant economic shock by studying how firms in the apparel industry have adapted to the Internet. We find that vertically integrated specialty retailers, e.g., The Gap, tended to start on‐line sales sooner than non‐integrated vendors, e.g., Nautica, and department stores. We also find that the products of vertically integrated retailers are more available on‐line than those of non‐integrated vendors. These results are consistent with greater contractual barriers, coordination costs and incentive problems that non‐integrated brands face relative to integrated companies in responding to the e‐commerce opportunity.

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