Quantifying Strategic Choice Along the Vertical Coordination Continuum

The qualitative and quantitative results of a study undertaken to test a decision framework firms might consider in choosing a vertical coordination strategy are presented. The posited five-step decision making process tested that a change in coordination strategy would occur if and only if a "yes" decision was made at each step. The results reported as case-based frequencies and as a discriminate analysis function provide strong support for the study's research propositions. The ability of an alternative to reduce the costliness of a coordination error and the acceptability of the risk/return tradeoff were critical to the willingness of a sample of producers to change coordination strategy. Implementability was significant, but not to the same extent as costliness of a coordination error or acceptability of the risk/return tradeoff.