C/E/11. ´Both horizontal and vertical boundaries of firms differ across industries and across firms within themŽ. Explain and discuss this statement

Conclusion
The production function of a firm and the legal environment in which it operates jointly determine both vertical and horizontal boundaries of a firm. These two major determinates aggregate a number of separate factors, variable across industries and firms within those industries. Therefore variation in the boundaries of firms both across and within industries is to be expected. Factors affecting the choice between vertical and market organisation may be aggregated into technical and agency efficiency. There is a natural tradeoffs between the two, different across industries. Thus industries with larger volume of production and greater and greater complexity and specificity of their products are likely to be more vertically integrated than industries which operate with smaller quantities or simpler products. Evidence gathered on several American industries supports this hypothesis.