In terms of the expansion of business in the nineteenth century in America, horizontal and vertical integration were integral in establishing how successful firms conducted themselves and how they handled competitors and other entities. To better understand how this occurred, it is important to understand the definitions of horizontal and vertical integration. Horizontal integration occurs when companies buy our or acquire other companies in the same industry in which they are currently operating. Vertical integration happens when companies buy out or acquire other companies that are either the previous or next step of the production process itself. Individuals like Carnegie and Rockefeller were able to exploit their competitive advantage by engaging in activities that involved horizontal and vertical integration. Using practices pertaining to vertical and horizontal integration, Carnegie and Rockefeller came to dominate their respective markets, making it essentially impossible for competitors to thrive while simultaneously setting their own ventures high and away from any conflict from others.
One strategy that was implemented was engaging in vertical monopolies, which essentially meant that they owned the rights to every piece of production at every stage of development for their productions. Carnegie often times would buy iron mines and various railroad companies, which allowed him to reduce the cost of producing large quantities of steel efficiently. Rockefeller operated in much the same way. He would often times buy out rival oil refineries, allowing him to grow horizontally. Furthermore, he would collude with particular railroads in exchange for better prices as a means to help shut out the other companies that were attempting to enter into the market that he had taken a firm control over. Old school historians argue that the reason these individuals were able to capitalize on these types of integration is largely due to the prevalence that they gained as they grew their businesses, and the level of wealth that this afforded them.
To many old school historians, having a large amount of tangible assets is what helped to define the approach that each business would take and having such a large level of influence greatly impacted one’s chances to continue expansion and building upon the framework that was established. The more old school approach focuses almost exclusively on wealth, power and morality as extensions of why individuals like Carnegie and Rockefeller chose to expand in the ways that they did. More Chandlerian historians view these events in terms of economic and sociological influence. In this regard, the choosing to expand into new territories helps a person to develop their economic standing. Once they obtain the resources needed to consistently cultivate this economic standing, it is human nature that they begin attempting to do so.
According to Chandler, sociologically, these businesses are prone to act in whatever manner they wish to ensure the longevity of themselves and their affiliates, until regulatory practices intervene or halt the progress of their advances. The pursuits that these men made went largely unchecked or unopposed for years because by the time that regulatory practices were being discussed, they had largely held the market for such an extended period of time. Furthermore, as regulation begins to creep into these businesses, it is evident that they attempt to double their efforts for expansion, as if ensuring a sort of safety net or distance they can push the efforts before it is pulled back by the regulatory practices. As such, depending on which school of thought conceives the ideas regarding vertical and horizontal integration, there are many different approaches and influences to utilizing these structures to expand one’s own endeavors. Furthermore, the inspiration for doing so for individuals like Rockefeller and Carnegie boils down to the sociological need to preserve themselves or the influence of power as a determining factor.