High transaction-specific investment between two industrial process stages is more likely to lead to vertical integration of these processes.

Question

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High transaction-specific investment refers to significant investments made to customize or adapt a product or process to the specific requirements of a transaction. When this occurs between two industrial process stages, it can create a high degree of dependency between the two stages, making vertical integration more attractive as a way to reduce transaction costs and increase control over the process. Therefore, it is more likely to lead to vertical integration.

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