Identify the three fundamental explanations of how vertical integration can create value and discuss how value is created under each

What will be an ideal response?

There are three explanations of how firms can create value through vertical integration:
a. Opportunism-Based Explanation: Reducing opportunistic threats from a firm's buyers and suppliers due to any transaction specific investments it may have made.
b. Capabilities-Based Explanation: By enabling a firm to exploit its valuable, rare, and costly-to-imitate resources and capabilities.
c. Flexibility-Based Explanation: When the decision-making environment is uncertain, firms create value by engaging in vertical integration. Under high uncertainty vertical integration can commit a firm to a costly-to-reverse course of action and the flexibility of a non-vertically integrated may be preferred.