In microeconomics and management, the term vertical integration describes a style of management control. Vertically integrated companies in a supply chain are united through a common owner. Usually each member of the supply chain produces a different product or (market-specific) service, and the products combine to satisfy a common need. It is contrasted with horizontal integration. Vertical integration has also described management styles that bring large portions of the supply chain not only under a common ownership, but also into one corporation (as in the 1920s when the Ford River Rouge Complex began making much of its own steel rather than buy it from suppliers).
Vertical integration is one method of avoiding the hold-up problem. A monopoly produced through vertical integration is called a vertical monopoly.
Nineteenth-century steel tycoon Andrew Carnegie's example in the use of vertical integration led others to use the system to promote financial growth and efficiency in their businesses.
Read more about Vertical Integration: Three Types, Examples, Problems and Benefits, Vertical Expansion
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