Digital Transformation and Vertical (Dis-)Integration: The Role of Technological Change and the Importance of the Institutional Context

The evolution of industries through vertical disintegration has long been the focus of attention and concern of management scholars and managers. However, most existing studies are based on transaction cost economics and address vertical disintegration choices as firm-level decisions. By integrating transaction costs economics with the resource-based view of the firm and moving from static analysis of individual transactions to dynamic analysis of the causes of change within an industry, the article develops an integrative framework that explains where and how vertical disintegration occurs. Drawing on the cultural heritage industry, the results show that vertical disintegration choices reflect differences in the way the institutional context favors (or prevents) the creation and capture of value enabled by technological change. On the one hand, firms with low strategic autonomy and limited flexibility in acquiring resources and competencies tend to evolve toward vertical disintegration decisions when digital platforms enter the industry-Google in our case. On the other hand, organizations with a high degree of strategic autonomy and high flexibility in acquiring resources and competencies opt for vertical integration strategies. In practical terms, the framework provides a tool for managers to understand whether their industry is prone to vertical disintegration.