The Determinants and Evolution of Major Inter-firm Transactions in the U.S. Apparel Sector

Abstract

This study provides a systematic description of the nature and evolution of major transactions in the U.S. apparel sector, using a theory that applies across sectors. This research investigates the determinants of the existence and magnitude of major inter-firm transactions, relying on a unique longitudinal dataset of over 2,000 of the largest transactional (buy-sell) relations between publicly traded firms in the U.S. apparel sector. The results indicate the importance of inter-firm complementarity, rather than inter-firm similarity, in explaining the sector architecture; thus contributing to the future improvement of industry classification systems. This study also contributes to a deeper understanding of the apparel sector focusing on the change in the relative importance of manufacturing activities versus service activities and in the involvement of firms from the outside apparel sector. Implications of inter-firm transactions are discussed regarding industry policies, and human and environmental welfare in manufacturing and raw materials industries.