Vertical Integration Strategies and the Performance of Poultry Firms in Ghana

The poultry sector serves as a major source of income for many people around the world. Its performance can be improved and its relatively high cost of production reduced through effective vertical integration strategies. In spite of the potential gains of vertical integration, Ghanaian poultry firms continue to operate with high transaction costs. This study aimed to examine the effects of vertical integration on the performance of layer (egg production) poultry firms in the Ashanti region of Ghana. Primary data on the degree of vertical integration of sixty large-scale poultry firms, measured as balanced or partial, was used to assess their performance, which was measured using profit margin and value added to sales. Simple linear regression, which was used to test the relationship between vertical integration and performance (profit margin), indicated that balanced vertical integration has a positive and significant relationship with profit margin. The propensity score matching result showed that poultry firms that have adopted balanced vertical integration have a higher average value in profit margin and value added to sales ratio than partially integrated poultry firms. Therefore, poultry farmers and potential investors are encouraged to pursue more integration initiatives to gain control over transaction costs, ensure timely delivery, and achieve higher profits.