Firms are "taper integrated" when they are backward or forward integrated but rely on outsiders for a proportion of their suppliers or distribution. Taper integration represents a useful compromise between desires to control adjacent businesses and needs to retain strategic flexibility. In this case, firms can monitor the R&D developments of outsiders, reduce vulnerability to strikes and shortages within their systems, and examine the products of competitors while enjoying the lower costs and greater advantages (and profit margins) or vertical integration.
Full integration can be used effectively if price competition is not fierce, diseconomies from temporary imbalances are not significant, and little hardship occurs from being cut off from outside market or technological intelligence. Full ownership risks the greatest proportion of equity, but many firms believe it is easier to manage that contractual or quasi- integrated relationships and prefer it over them.
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