Regional cooperation and corporate vertical disintegration: Evidence from Chinese listed companies

This study examines the impact of regional cooperation on corporate vertical disintegration. To provide a theoretical foundation, we extend the Grossman-Hart-Moore framework by incorporating parameters that capture the degree of regional cooperation and the transaction costs typically incurred by suppliers and producers. Using detailed firm-level data from Chinese listed companies, our empirical analysis demonstrates that regional cooperation significantly promotes vertical disintegration. The mechanism analysis suggests that this effect is primarily driven by a reduction in external transaction costs, which increases outsourcing efficiency and facilitates stronger inter-firm collaboration. Moreover, further analysis shows that the enhanced vertical disintegration facilitated by regional cooperation can significantly improve corporate production efficiency. These findings highlight the critical role of regional cooperation in reshaping corporate structures and enhancing economic performance.