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Firms can be horizontally diversified, with considerable breadth, or vertically integrated, with great depth. This study explores how breadth and depth affect each other as influenced by capability requirements and coordination demands. Using construction industry data, we assess the interdependence between contractors' portfolios of building types (horizontal scope) and the extent of integration of the activities needed to complete each project (vertical scope). We find that vertical and horizontal scope have a negative interdependency only when contractors face managerial constraints due to coordination challenges. Further, we show that this effect can be mitigated through organizational structures that centralize key functions. Our findings highlight the importance of coordination in the theory of the firm, as we link firm boundaries to managerial coordination and internal organization. [ABSTRACT FROM AUTHOR]

Extant research on the theory of the firm has stressed the need to consider interdependencies when analyzing firm boundary choices. We study the existence of interdependencies between boundary decisions using a unique database that includes detailed organizational information on 59% of the construction projects undertaken in the Chilean housing sector between the years 2005 and 2009. Specifically, we show that integration between design and construction activities increases the likelihood of integration between ownership/development and construction activities (and vice versa). This result is of a large magnitude, supporting the view that boundary choices need to be studied in relation to each other. A careful identification strategy also allows us to shed light on the mechanisms that likely drive this interdependency: a “coordination effect,” a “transaction hazard effect,” and a “production effect.” The latter is shown to be the most important mechanism at work, suggesting that “boundary choice complementarity” is primarily motivated by the need to align investment incentives for the joint development of capabilities. [ABSTRACT FROM PUBLISHER]

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The article discusses the antitrust legislation that sanctions predatory pricing in Chile. According to the article, it is importance to revise the main criteria followed by the Chilean Antitrust Agencies when evaluating predatory pricing. It concludes that the criteria followed by the antitrust authorities has not been uniform through time.