Skip to content
Licensed Unlicensed Requires Authentication Published by De Gruyter Oldenbourg December 5, 2017

The Identification of Up- and Downstream Industries using Input–Output Tables and a Firm-level Application to Minority Shareholdings

  • Olivia A. Bodnar , Achim Buchwald and John P. Weche EMAIL logo


We present a method for identifying up- and downstream industries in inter-industry datasets via input–output tables. We apply this approach to aggregated European input–output data and present results on identified industry links and their sensitivity to threshold definitions. We furthermore test the time-consistency of the up- and downstream assignments based on input–output tables, and discuss the limitations of this method. Finally, the method is used to test anti-competitive effects of non-controlling minority shareholdings.

JEL Classification: C81; F14; F15; L22; L23


A.1 Industry classification and indirect links

Table A.1:

NACE Rev. 2 Industry Classification.

2-digit CodeDescription
01Crop and animal production, hunting and related service activities
02Forestry and logging
03Fishing and aquaculture
05Mining of coal and lignite
06Extraction of crude petroleum and natural gas
07Mining of metal ores
08Other mining and quarrying
09Mining support service activities
10Manufacture of food products
11Manufacture of beverages
12Manufacture of tobacco products
13Manufacture of textiles
14Manufacture of wearing apparel
15Manufacture of leather and related products
16Manufacture of wood and of products of wood and cork, except furniture;
manufacture of articles of straw and plaiting materials
17Manufacture of paper and paper products
18Printing and reproduction of recorded media
19Manufacture of coke and refined petroleum products
20Manufacture of chemicals and chemical products
21Manufacture of basic pharmaceutical products and pharmaceutical preparations
22Manufacture of rubber and plastic products
23Manufacture of other non-metallic mineral products
24Manufacture of basic metals
25Manufacture of fabricated metal products, except machinery and equipment
26Manufacture of computer, electronic and optical products
27Manufacture of electrical equipment
28Manufacture of machinery and equipment n.e.c.
29Manufacture of motor vehicles, trailers and semi-trailers
30Manufacture of other transport equipment
31Manufacture of furniture
32Other manufacturing
33Repair and installation of machinery and equipment
35Electricity, gas, steam and air conditioning supply
36Water collection, treatment and supply
38Waste collection, treatment and disposal activities; materials recovery
39Remediation activities and other waste management services
41Construction of buildings
42Civil engineering
43Specialised construction activities
45Wholesale and retail trade and repair of motor vehicles and motorcycles
46Wholesale trade, except of motor vehicles and motorcycles
47Retail trade, except of motor vehicles and motorcycles
49Land transport and transport via pipelines
50Water transport
51Air transport
52Warehousing and support activities for transportation
53Postal and courier activities
56Food and beverage service activities
58Publishing activities
59Motion picture, video and television programme production, sound recording
and music publishing activities
60Programming and broadcasting activities
62Computer programming, consultancy and related activities
63Information service activities
64Financial service activities, except insurance and pension funding
65Insurance, reinsurance and pension funding, except compulsory social security
66Activities auxiliary to financial services and insurance activities
68Real estate activities
69Legal and accounting activities
70Activities of head offices; management consultancy activities
71Architectural and engineering activities; technical testing and analysis
72Scientific research and development
73Advertising and market research
74Other professional, scientific and technical activities
75Veterinary activities
77Rental and leasing activities
78Employment activities
79Travel agency, tour operator and other reservation service and related activities
80Security and investigation activities
81Services to buildings and landscape activities
82Office administrative, office support and other business support activities
86Human health activities
87Residential care activities
88Social work activities without accommodation
94Activities of membership organisations
95Repair of computers and personal and household goods
96Other personal service activities
Table A.2:

Summary statistics of indirect up- and downstream assignments.

CutoffNumber of vertical linksNumber of vertically linked industries
(Percentage of all possible links(Percentage of all industries in parentheses)
in parentheses)c
  1. Note: The sample covers 493,039 triangular relationships between 79 different industries.

Table A.3:

Summary statistics for the firm dataset (2006–2013).

Transaction variables
No. of obs.%No. of obs.%
Upstream transactiont1,9450.041,1590.03
Downstream transactiont1,3870.031,1750.03
Horizontal transactiont4,6810.102,7480.06
Vertical transactiont12,0210.2710,6580.24
Considering secondary industries
Upstream transactiont2,7030.061,7100.04
Downstream transactiont2,2070.051,8990.04
Horizontal transactiont13,3020.3014,8390.33
Other variables
Lerner index0.960.080.000021
Turnover (mill. EUR)20.77348.470.001163,000
Age (years)19.3915.681896
Group member0.350.4801
  1. Note: The number of firm-year observations for all variables is 4,467,488.

A.2 Data preparation

For the financial data, the Orbis version as of June 2015 was used, and all European firms with a turnover of at least 2 million EUR in at least one year during the observation period and an available unconsolidated account were extracted for 2006–2013. The sample covers firms from NACE 2-digit industries 01 to 82 (without financial services) and EU-28 countries without Cyprus and Malta. In contrast to the Monopolies Commission, we conduct our analysis for a sample including firms from Germany, Austria, and the UK.

Historic shareholder information stems from the Orbis company ownership module and was merged to firm IDs both on shareholder and on target level. Therefore, at the target firm level only capital links can be considered whose shareholders are located within the EU-28 countries. Shareholdings of institutional investors and natural persons were not considered. A detected minority shareholding in in yeart was also assumed to be existent in yeart+n, when shareholder information is missing in these years, but the firm was active in terms of reported turnover.

The Lerner index variable was restricted to values between zero and one, whereas all values below zero were treated as zero values. Particularly with regard to panel analyses, a careful preparation of the Orbis database is needed. Therefore, observations with asymmetric observations–-which is observations with non-missing information for the outcome variable, but missing information for control variables or vice versa–-were excluded. Furthermore, all firms with inconsistent missing values were dropped from the unbalanced sample. Inconsistency here refers to cases in which missing values occur in between reported figures and thus are unlikely to be caused by a firm’s inactivity. Missing information can also occur in years in which firms had not been established or already had exited the market: these observations remain in our unbalanced sample. Moreover, only firms with at least three consecutive observations were kept in the sample.


Acemoglu D., Carvalho V.M., Ozdaglar A., Tahbaz-Salehi A. (2012), The Network Origins of Aggregate Fluctuations. Econometrica 80 (5): 1977–2016.Search in Google Scholar

Acemoglu, D., Aghion P., Griffith R., Zilibotti F. (2010), Vertical Integration and Technology: Theory and Evidence. Journal of the European Economic Association 8 (3): 989–1033.10.1162/jeea_a_00013Search in Google Scholar

Aghion P., Bloom N., Blundell R., Griffith R., Howitt P. (2005), Competition and Innovation: an Inverted-U Relationship. Quarterly Journal of Economics 120 (2): 701–728.Search in Google Scholar

Ahern K.R., Harford J. (2014), The importance of Industry Links in Merger Waves. Journal of Finance 69 (2): 527–576.10.1111/jofi.12122Search in Google Scholar

Ahern K.R. (2013), Network Centrality and the Cross Section of Stock Returns. SSRN working paper, December 2013.Search in Google Scholar

Ahern, K.R. (2012). Bargaining Power and Industry Dependence in Mergers. Journal of Financial Economics 103 (3): 530–550.10.1016/j.jfineco.2011.09.003Search in Google Scholar

Atalay E., Hortacsu A., Syverson C. (2014), Vertical Integration and Input Flows. The American Economic Review 104 (4): 1120–1148 (29).10.1257/aer.104.4.1120Search in Google Scholar

Buchwald A. (2014), European Firm Networks and Competition: Theoretical Background and Empirical Evidence. International Journal of Networking and Virtual Organisations 14 (4): 355–376.10.1504/IJNVO.2014.067890Search in Google Scholar

Elzinga K.G., Mills D.E. (2011), The Lerner Index of Monopoly Power: Origins and Uses. American Economic Review: Papers and Proceedings 101 (3): 558–564.10.1257/aer.101.3.558Search in Google Scholar

Commission European (2013), Towards More Effective Merger Control, Commission Staff Working Document, SWD(2013) 239 final June 25th.Search in Google Scholar

Eurostat (2008). Eurostat Manual of Supply, Use and Input-Output Tables. Eurostat methodologies and working papers.Search in Google Scholar

Fan J.P.H., Goyal V.K. (2006), On the Patterns and Wealth Effects of Vertical Mergers. Journal of Business 79 (2): 877–902.Search in Google Scholar

Fee E., Thomas S. (2004), Sources of Gains in Horizontal Mergers: Evidence from Customer, Supplier and Rival Firms. Journal of Financial Economics 74 (3): 423–460.10.1016/j.jfineco.2003.10.002Search in Google Scholar

Fresard, L., Hoberg G., Phillips G.M. (2013), The Incentives for Vertical Mergers and Vertical Integration, working paper, University of Maryland, College Park.10.2139/ssrn.2242425Search in Google Scholar

Gilo D., Moshe Y., Spiegel Y. (2006), Partial Cross Ownership and Tacit Collusion. The RAND Journal of Economics 37 (1): 81-9910.1111/j.1756-2171.2006.tb00005.xSearch in Google Scholar

Grossman S.J., Hart O.D. (1986), The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration. Journal of Political Economy 94 (4): 691-719.10.1086/261404Search in Google Scholar

Hamermesh D. (2007), Viewpoint: Replication in economics. Canadian Journal of Economics 40 (3): 715–733.10.1111/j.1365-2966.2007.00428.xSearch in Google Scholar

Hart O., Tirole J. (1990), Vertical Integration and Market Foreclosure. Booking papers on Economic Activity, pp. 205–76.10.2307/2534783Search in Google Scholar

Hart O., Moore J. (1990), Property Rights and the Nature of the Firm. Journal of Political Economy 98 (6): 1119–1158.10.1086/261729Search in Google Scholar

Hoberg G., Phillips G.M. (2010), New Dynamic Product Based Industry Classifications and Endogenous Product Differentiation, Working Paper, University of Maryland, College Park.10.3386/w15991Search in Google Scholar

Kedia S., Ravid S.A., Pons V. (2011), When do Vertical Mergers Create Value? Financial Management 40 (4): 845–877.10.1111/j.1755-053X.2011.01164.xSearch in Google Scholar

Klein B., Crawford R.G., Alchian A.A. (1978), Vertical Integration, Appropriable Rents, and the Competitive Contracting Process. Journal of Law and Economics 21 (2): 297–326.10.4337/9781849806909.00025Search in Google Scholar

Lerner A. (1934), The Concept of Monopoly and the Measurement of Monopoly Power. Review of Economic Studies 1 (3): 157–175.10.2307/2967480Search in Google Scholar

Matsusaka J.G. (1996), Did Tough Antitrust Enforcement Cause the Diversification of American Corporations? Journal of Financial and Qualitative Analysis 31 (2): 283–294.10.2307/2331183Search in Google Scholar

McGuckin R.H., Nguyen S.V., Andrews S.H. (1991), The Relationships Among Acquiring and Acquired Firms’ Product Lines. Journal of Law and Economics 34: 477–502.10.1086/467233Search in Google Scholar

Monopolkommission (2016), XXI. Main Report: Wettbewerb 2016, Baden-Baden.Search in Google Scholar

Monopolkommission (2014), XX. Main Report: Eine Wettbewerbsordnung für die Finanzmärkte, Baden-Baden.Search in Google Scholar

Nickell S.J. (1996), Competition and Corporate Performance. Journal of Political Economy 104 (4): 724–746.10.1086/262040Search in Google Scholar

Ordover J.A., Saloner G., Salop S.C. (1990), Equilibrium Vertical Foreclosure. The American Economic Review 80 (1): 127–142.Search in Google Scholar

Pfeffer J. (1992), A Resource Dependence Perspective on Intercorporate Rela-tions. 25–55 in: Mizruchi M.S., Schwartz M. (eds.), Intercorporate Relations: The Structural Analysis of Business. Cambridge: Cambridge University Press.10.1017/CBO9780511570841.002Search in Google Scholar

Ravenscraft D., Scherer F.M. (1987), Mergers, Sell-offs and Economic Efficiency. Washington D.C. Brookings Institutions.Search in Google Scholar

Reynolds R.J., Snapp R., Bruce R. (1986), The Competitive Effects of Partial Equity Interests and Joint Ventures. International Journal of Industrial Organization 4 (2): 141–153.10.1016/0167-7187(86)90027-5Search in Google Scholar

Salinger M.A. (1988). Vertical Mergers and Market Foreclosure. The Quarterly Journal of Economics 103 (2): 345–356.10.2307/1885117Search in Google Scholar

Shahrur H. (2005), Industry Structure and Horizontal Takeovers: Analysis of Wealth Effects on Rivals, Suppliers, and Corporate Customers. Journal of Financial Economics 76 (1): 61–98.10.1016/j.jfineco.2004.01.001Search in Google Scholar

Shenoy J. (2012), An Examination of the Efficiency, Foreclosure, and Collusion Rationales for Vertical Takeovers. Management Science 58: 1482–501.10.1287/mnsc.1110.1498Search in Google Scholar

Williamson O.E. (1971), The Vertical Integration of Production: Market Failure Considerations. The American Economic Review 61 (2): 112–123.Search in Google Scholar

Williamson O.E. (1979), Transaction-Cost Economics: The Governance of Contractual Relations. The Journal of Law & Economics 22 (2): 233–261.10.1086/466942Search in Google Scholar

Article note

The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors and should not be attributed in any manner to their employers or affiliations.

Received: 2016-10-11
Revised: 2017-04-30
Accepted: 2017-11-13
Published Online: 2017-12-05
Published in Print: 2017-12-20

© 2017 Oldenbourg Wissenschaftsverlag GmbH, Published by De Gruyter Oldenbourg, Berlin/Boston

Downloaded on 22.2.2024 from
Scroll to top button