Institutional and economic framework for vertical integration

In conditions of tough competition not only between individual businesses, but also between entire countries the search for sources of their development is a major challenge that governments at all levels have to face. As evidenced by international experience, one such source is the creation of vertically integrated companies controlled by the state in priority sectors of economy (engineering, metallurgy, chemical industry, timber industry, agriculture, etc.). It helps to concentrate production, finances and commodity capital, to increase the rate of its reproduction, to implement innovation, to produce products with high added value, and to enter global markets. However, at present, economic science has not developed a common understanding of the essence, nature, specifics of formation and evaluation of performance of vertically integrated entities. In this regard, the paper presents a critical analysis of existing approaches to understanding vertical integration, its determining factors, potential benefits and risks. The article substantiates the necessity of developing the state policy on modernization and neo-industrialization of domestic economy through the creation of vertically integrated structures.