very business organization, irrespective of the sector it belongs, wants to expand its operations and achieve organizational effectiveness. The intention to expand business operations and achieve organizational effectiveness has made some manufacturing companies adopt vertically integrated strategies. If a manufacturing company moves into an area by creating its own sources of supply of raw materials through the opening of subsidiary company or purchasing an existing supplier, the company can be said to have adopted a backward integration strategy. Typically, the supply chain of a manufacturing company starts with the purchase of raw materials from a supplier and ends with the sale of the finished product to the consumer. However, a company can decide to extend its business portfolio by integrating vertically through the purchase of its suppliers of raw materials to reduce manufacturing costs or engage in the retailing or direct sale of the final products to consumers by opening multiple retail stores. If the company decides to purchase its supplies of raw materials, the company is said to be using a backward integration strategy to grow and expand its business (Freeland, 2000). Backward integration is not a new growth strategy as a good number of companies have adopted backward integration strategy. For instance, Netflix, a US based DVD rental, is a typical example of company that adopts backward integration strategy. The company initially started as a DVD rental business and later moved into the production of its own movies and films. The company’s executives quickly realized that they could expand the business operations by producing their own original films. Netflix was smart enough to promote its original film using its distribution model. This is a backward vertical integration. Also, a solar power company produces photovoltaic products and manufactures the cells used to produce its own products. By manufacturing the cells used to produce the products, the company moves along the supply chain to assume the manufacturing duties, implementing a backward integration strategy. Shell Petroleum Development Company (SPDC) and Exxon-Mobile Nigeria Limited have also adopted this backward vertical integration strategy to achieve organizational effectiveness (Fan 2000; Misund et al, 2012). Companies in the manufacturing sector integrate backwardly for various reasons. For instance, if a manufacturing company feels that it is paying too much money for raw materials than it would cost to produce its own raw materials or feels that there is always a delay in the supply of raw materials or production inputs, it may decide to integrate vertically in a backward direction. Here, the company integrates backwards to reduce costs of raw materials and ensure timely delivery of raw materials or production inputs (Acemoglu et al, 2009). Barcena-Ruiz and Garzon (2018) noted that companies adopt backward integration to achieve organizational effectiveness because it ensures regular supply of raw materials needed to produce products, reduce production costs, increase productivity, sales and profitability, and gain control of the market. It is a strategy of avoiding the hold-up problem (Rothaermel et al, 2006). Backward integration strategy can be used as a tool to achieve organizational effectiveness. Manufacturing companies want to achieve organizational effectiveness. According to Kerr and Landauer (2004), organizational effectiveness refers to the ability of an organization to meet its set goals and objectives and remain competitive in its industry. It requires strategic and prudent use of organizational resources to gain a competitive advantage and meet shareholders and stakeholders’ expectations. Effective organizations strive to deliver results. Such organizations are highly productive and use available resources to produce the desired results that will take the organization to a greater height. Meraku (2017) stated that an effective organization demonstrates strengths and takes advantage of market opportunities to gain a competitive edge over its competitors. Such organization shows superior market and financial performance when compared to their less effective peers. Desai and Mukherji (2001) stated that backward integration investment generates commensurable returns for companies and improve their effectiveness. It is against this backdrop that this study examines the relationship between backward integration strategy and effectiveness of food and beverage manufacturing firms in South-South Nigeria. ## Statement of the Problem Achieving Organizational effectiveness has become a challenging task for these companies as they operate in a harsh economic environment. The food and beverage manufacturing sub-sector is greatly affected by the poor economic climate in Nigeria. Given the high cost of manufacturing in Nigeria, it becomes imperative for food and beverage manufacturing firms in Nigeria to integrate backwardly in order to expand their operations, reduce costs, increase productivity and achieve organizational effectiveness. It is the researcher’s argument that backward integration strategy can help to achieve organizational effectiveness. A good number of studies (e.g. Hamdaoui & Bouayad, 2019; Isaksen, Dreyer & Gronhaug 2011; Louca & Panavides, 2016; Shah, Ahmad, Malik & Khan, 2020; Pieri & Zaninotto, 2013; Peyrefitte, Golden & Brice, 2002; Wellstone, 2000) have been conducted on backward integration strategies of business firms. However, most of the studies conducted on backward integration strategy of business firms were carried out in Malaysia, United States, Netherlands, Germany, Pakistan, Sweden, Erbil/Iraq, Japan, United Kingdom (UK), Morocco and Norway while empirical studies that examined backward integration strategies and effectiveness of food and beverage manufacturing in South-South Nigeria are limited. This has created a gap in literature that needs to be filled. It is in view to filling this gap in literature that prompted this study. ## Objectives of the Study The main objective of this study is to examine the relationship between backward integration and effectiveness of food and beverage manufacturing firms in South-South Nigeria. Other specific objectives include: 1. To determine the relationship between backward integration and productivity of food and beverage manufacturing firms in South-South Nigeria. 2. To ascertain the relationship between backward integration and sales growth of food and beverage manufacturing firms in South-South Nigeria. 3. To explore the relationship between backward integration and profitability of food and beverage manufacturing firms in South-South Nigeria. ## Research Questions To address the objectives of this study, the following research questions were raised: 1. To what extent does backward integration contribute to productivity of food and beverage manufacturing firms in South-South Nigeria? 2. How does backward integration relate to sales growth of food and beverage manufacturing firms in South-South Nigeria? 3. To what extent does backward integration contribute to profitability of food and beverage manufacturing firms in South-South Nigeria? ## Hypotheses The following hypotheses were formulated to guide this study: - There is no significant relationship between backward integration and productivity of food and beverage manufacturing firms in South-South Nigeria. - There is no significant relationship between backward integration and sales growth of food and beverage manufacturing firms in South-South Nigeria. - There is no significant relationship between backward integration and profitability of food and beverage manufacturing firms in South-South Nigeria. ## Significance of Study The significance of this study cannot be overemphasized. This is because the results of this study would be relevant to food and beverage manufacturing firms as it would sensitize them on the need to embrace backward integration to reduce costs and achieve organizational effectiveness. The study would be useful to top executives and managers as it would broaden their knowledge of how backward integration can be used to achieve greater productivity, sales growth and profitability of firms. This information will assist top managers in formulating policies and strategies that will facilitate the practice of backward integration along their supply chain and achieve organizational effectiveness. This study will be relevant to investors as it would sensitize them to the importance of backward integration in achieving organizational effectiveness. The study will be useful by students, lecturers and research consultants as it would add to the existing stock of knowledge on backward integration which they can use as reference for their studies. <figure id="fig:conceptual-framework" data-latex-placement="tbp"> <img src="https://doc.globaljournals.org/ioye8x_253452/ocr/media/image1.png" style="height:75.0%" /> <figcaption>Operational Conceptual Framework</figcaption> </figure> # Review of Related Literature ## Concept of Backward Integration Backward integration is a firm’s strategy to expand its operations by being the supplier of its own raw materials for production with a view to avoiding excessive costs or delay in the supply of raw materials (Freeland, 2000). Kenton (2021) defined backward integration as a form of vertical integration in which a company expands its role to fulfill tasks formerly completed by other businesses in the supply chain. It occurs when a company buys another company that supplies the products or services needed for production (Kenton, 2021). Forbes and Lederman (2009) described backward integration as a business strategy whereby a company decides to move backward along its supply chain by performing one or two stages of the processes. It occurs when a company expands its operations backward along its production path into manufacturing (Ali & Syverson, 2007). In other words, if a company integrates by moving into an area that serves as suppliers, the process is referred to as backward integration (Cainelli & Iacobucci, 2014). In backward integration, the firm creates its own sources of supply, perhaps by establishing a subsidiary company or purchasing an existing supplier (Cainelli & Iacobucci, 2014). Williamson in Hamdaoui and Bouayad (2019) stated that backward integration allows the firm to move from the purchase of inputs to production of inputs. A typical example of backward integration is when a company buys the company that supplies its business with raw materials. Fan (2000) stated that companies acquire other businesses who supply them with inputs to complete their backward integration strategy. They can also establish their own subsidiary to accomplish the task (Kenton, 2021). The main reason for backward integration is the desire to increase the dependability of supply or quality of raw materials or production inputs (Cainelli & Iacobucci, 2014). Gaynor (2006) noted that companies that implement backward integration try to take over a portion of their supply chain. According to Kenton (2021), a supply chain is a group of individuals, organizations, resources, activities and technologies involved in the manufacturing and sale of a product. The supply chain begins with the assembling or purchasing of raw materials, and this is followed with the manufacturing process, then the distribution of finished goods to middlemen (wholesalers and retailers) and finally the sale of the finished goods to the end consumers. A typical supply chain showing a backward integration strategy is illustrated in figure 2.1 below: <figure id="fig:supply-chain" data-latex-placement="tbp"> <img src="https://doc.globaljournals.org/ioye8x_253452/ocr/media/image2.png" style="height:75.0%" /> <figcaption>A typical supply chain showing a backward integration. Source: Adapted from Hunger &amp; Wheelen (2003).</figcaption> </figure> From figure 2.1 above, it could be observed that the supply chain begins with the purchasing of raw materials, and this is followed with the manufacturing process, and then the distribution of finished goods to middlemen (wholesalers and retailers) and finally the sale of the finished goods to the end consumers. However, if the retailer who usually buy goods in small quantities directly from the wholesaler and sells in unit directly to the consumers decides to buy the finished products in bulk (large quantities) directly from the manufacturer and then sells in unit to the consumer, the retailer can be said to have integrated backward in the channel of distribution or supply chain because he or she is performing the function of the wholesaler. In addition, if the retailer decides to take a further backward step to manufacture the product by himself/herself, he or she can be said to have integrated backward in the supply chain by performing the two stages in the supply chain (manufacturing and wholesaling). However, if the retailer decides to produce the raw materials for manufacturing by himself/herself, the retailer can be described as having implemented a further backward integration since he or she performs all three stages of the supply chain. Backward integration is not a new business strategy for food and beverage industry. Many food and beverage manufacturers and retailers have implemented backward integration strategy (Elberfeld, 2002). A typical example of backward integration can be seen in a bakery business owner who buys wheat farm or wheat processor. In this case, the retailer (bakery business owner) purchases its manufacturer or manufacturing equipment to enable him or her to manufacture bread by himself/herself, thereby cutting down the intermediary in the supply chain and reducing competition. Backward integration is considered as a business strategy to reduce cost of raw materials and improve firm efficiency as opined by Acemoglu et al (2009). For instance, if a manufacturing company feels that it is paying too much money for raw materials than it would cost to produce its own raw materials or feels that there is always a delay in the supply of raw materials or production inputs, it may decide to integrate vertically in a backward direction. Here, the company integrates backwardly to reduce costs of raw materials and ensure timely delivery of raw materials or production inputs. Desai and Mukherji (2001) stated that backward integration enables a manufacturing company to control the suppliers of raw materials and inventories. ## Concept of Organizational Effectiveness Organizational effectiveness refers to the degree to which an organization meets its set goals (Connolly et al, 1980). The American Public Human Services Association (APHSA) (2009) defines organizational effectiveness as a systemic and systematic approach to continuously improve an organization’s performance, performance capacity and client outcomes. According to APHSA, systemic refers to considering an entire system while systematic implies taking a step-by-step approach. In a nutshell, organizational effectiveness is a step-by-step approach to continuously improving an entire organization (American Public Human Services Association, 2009). Organizations operate in a dynamic and competitive environment which implies that organizations must strive to achieve effectiveness amid intense competition and fast changing environment. Tahsildari and Shahnaei (2015) opined that the effectiveness of an organization is its ability to perform a function with optimal levels of input and output. They further stated that improving organizational effectiveness is a sober concern for any organization as a matter of existence. Achieving organizational effectiveness is the key to business success and consequently managers must increase the efficiency of workers and other productive factors to ensure that effectiveness is obtainable. Zammuto in Tahsildari and Shahnaei (2015) stated that the best way to characterize the effectiveness of an organization is to determine how well it accomplishes its objectives without forcing strains on the authoritative framework, and how well it meets the criteria set by the constituencies of an association. ## Measures of Organizational Effectiveness Organizational effectiveness can be measured using various criteria. In this study, organizational effectiveness is measured using productivity, sales growth and profitability. ### Productivity Organizational productivity is defined as the total output produced by an organization at a given period in relation to the input (resources - material, human, financial and technology) invested in an economic activity (Bartelsman & Dorns, 2000). Akide in Upev et al (2015) stated that organizational productivity involves striking a balance between all factors of production that will give the greatest result for the smallest effort, the relationship between result (output) and the means employed (input), efficiency and effectiveness, and elimination of waste in all aspects. Organizational productivity requires effective and most efficient use of the resources available within an organization in meeting the specific goals of the organization and needs of the users (Upev et al, 2015). Organizational productivity is largely dependent on the productivity of individual employees. If the employees in an organization are productive, the organization is more likely to accomplish more in each period. On the other hand, when employees are unproductive, they will take much time to complete their task, and the organization will accomplish less despite the huge resources (input) invested in the project (Nawaz & Nawaz, 2012). Sharma and Sharma (2014) stated that employee productivity is greatly influenced by the amount of time that an employee is physically and mentally present at work and efficiently working towards the achievement of organizational goals. When an employee can accomplish his or her task efficiently, such employee is said to be productive. ### Sales Growth The concept “sales growth” can be defined as an increase in the quantity or amount of goods sold by a company over a given period (Dion, 2003). Sales growth of a company can be determined by comparing the number of sales made by the company periodically usually yearly (Burke, 2005). If the sales made by a company in 2019 for example is N20m and the number of sales made by the same company in 2020 is N25m, the company can be said to have experienced sales growth of 5 million. Roberge (2014) stated that sales growth is usually calculated in percentage and the percentage increase is often referred to as the “sales growth rate.” Companies often measure their sales growth rate periodically. Although some companies may determine their sales growth on a monthly, quarterly or yearly basis, evidence showed that small sized companies measure their sales growth on a daily or weekly basis (Banat & Wandebori, 2012). A company is said to have experienced sales growth if the amount of goods sold this week is N2 million and the amount of goods sold last week is N1 million. The additional N1 million is recorded as the sales growth. When a company experiences significant growth in sales, it means more profit for its business and when the profit for the business increases, the company can then expand its operations and achieve business growth. ### Profitability Profitability can be defined as the amount of money made from the net sales of a company. Reibstein et al (2006) defined profit as the revenue or money earned by a company from its net sales after all other expenses have been deducted. The profit is usually derived from the normal operations of a company and is calculated at the end of the year. Profitability growth therefore refers to the amount in which the profit of a company has increased from year to year (Kotler & Armstrong, 2004). It is obvious that company is treated as a legal entity separate and different from its own, hence the profit of a company is ascertained at the end of the accounting year. If the profit made by a company in the year 2019 for instance is N10 million and the amount of profit made by the company in the following year being 2020 is N15 million, it means that the company has experienced profitability growth of 5 million. Every company, irrespective of the sector it belongs, wants to increase profitability. Profits are one of the most important criteria used to determine how well a company is doing in the market. It indicates how competitive a company is and determines the financial stability of the company (Maohua, 2009). ## Backward Integration and Organizational Effectiveness Backward integration strategy has the potential of achieving organizational effectiveness. According to Williamson in Hamdaoui and Bouayad (2019), backward integration allows the firm to move from the purchase of inputs to production of inputs. Backward integration strategy is capital intensive in the sense that it requires a huge sum of money to buy or invest in part of the supply chain. Afendulis and Kessler (2011) stated that companies that adopt backward integration strategy tend to save costs and improve efficiency. Tucker and Wilder in Kaiser and Obermaier (2020) posited that backward integration tends to reduce the number of external purchases while leaving sales constant. Backward integration enables a company to control and manage different aspects of the supply chain such as manufacturing, distribution and sales processes, and achieve organizational effectiveness (Acemoglu et al, 2009). Backward integration enables a manufacturing company to expand business operations backwardly by being the producer of its own raw materials used for production, and this helps to lower the cost of raw materials, increase productivity, sales and profit margin, and achieve organizational effectiveness (Gil, 2007). Forbes and Lederman (2009) opined that backward integration is beneficial to companies that are determined to achieve organizational effectiveness because it enables them to control parts of the supply chain processes to reduce costs and improve their business efficiency. Elberfeld (2002) added that backward integration strategy reduces transportation costs and delivery turnaround times. It also helps companies to reduce disruptions from suppliers that might lead to financial hardship (Woodruff, 2002). Backward integration strategy enables a company to get its products to consumers quickly without any reason for disruption, expands its economies of scale, lowers costs, increase productivity and achieve organizational effectiveness (Kaiser, 2018). Lahiri and Narayanan (2013) argued that through backward integration, a manufacturing company can achieve organizational effectiveness by increasing its overall productivity, sales and profitability since it creates its own source of raw material supply and sells its own brand. Bresnahan and Levin (2008) stated that a company that decides to integrate backwardly has the advantage of controlling some input used for the manufacturing of its products. A good number of companies have used backward integration strategies to achieve organizational effectiveness. This was the strategy used by an automobile company. Ford Motors, in 1920s. Ford Motors owns Glass Company, Metal Company as well as Tire Company. The company controls these three subsidiaries’ inputs because they are very important in car manufacturing process. So, the company wants to create a stable supply of these inputs to ensure that manufacturing process is not disrupted due to high costs of supply of these materials or delay in supplying them. By ensuring regular supply of inputs such as raw materials for production, the company was able to maintain its organizational effectiveness in terms of manufacturing top quality cars, increasing sales and profitability. This type of integration strategy was also used by other automobile companies such as Toyota and Mercedes that want to minimize costs, increase sales and achieve organizational effectiveness. These two automobile companies adopt backward integration strategy by integrating the production of car inputs or spare parts into their car manufacturing business and this strategy worked for them to achieve organizational effectiveness. Another typical example of company that used backward integration strategies to achieve organizational effectiveness is Carnegie Steel Company. This company controlled not only the mills where the steel was made, but also the mines where the iron ore was extracted, the coal mines that supplied the coal, the ships that transported the iron ore and the railroads that transported the coal to the factory, as well as the coke ovens where the coal was coked (Isaksen & Dreyer, 2000). The company strongly focused on producing talent internally from the bottom rather than purchasing raw materials from other companies. Through the implementation of this backward integration strategy, Carnegie Steel Company was able to minimize costs, increase productivity, sales, profitability and achieve organizational effectiveness. Backward integration strategy has not only been proven to be a viable strategy for achieving organizational effectiveness in the automobile and steel sectors, but also multinational oil companies such as Shell Petroleum Development Company (SPDC) and Exxon-Mobile Nigeria Limited have also adopted this backward vertical integration strategy to achieve organizational effectiveness. According to Misund et al (2012), SPDC and Exxon-Mobile Nigeria Limited are not only involved in the production of crude oil rather they are also actively involved in the entire supply chain from discovering of crude oil deposits, drilling and extraction of crude oil, transportation of crude oil around the world, refining it into petrol (fuel) and gasoline, to the distribution of the product to company-owned retail filling stations, or finally sell in litres to the final consumers or users. MTN Nigeria Limited is another good example of company that have integrated vertically to achieve organizational effectiveness. This telecommunication company has integrated vertically making their own MTN Smart phone, telephone exchange equipment, telephone cables, solar energy and other supplies. Today, MTN Nigeria Limited has the largest number of customers in Nigeria as the company has been successful in using vertical integration strategy to achieve organizational effectiveness. Backward integration strategy has been proven to be a suitable business strategy for achieving organizational effectiveness. Companies that adopt this strategy feel that their suppliers have too much power over them. For instance, in the case of Ford Motor Company, the executives of the company decided to create subsidiaries that supply key inputs to their vehicles such as metal, glass and rubber tires. This strategy gives Ford Motors the assurance that the company’s manufacturing process would not be disrupted if suppliers fix higher prices for these essential materials or delay in supplying these materials. ## Theoretical Review This study adopted transaction cost economics theory which was developed by Coase in 1937 and expanded by Williamson in 1971. The theory provides a coherent framework for understanding the determinants of vertical integration in different industries. The core issue of transaction cost economics is that utilizing the market system is not free as it causes cost for using it which is called “transaction costs” (Kaiser & Obermaier, 2020). Arrow in Isaksen and Dreyer (2000) described transaction costs as the cost of organizing the economic system. Hence, the transaction costs of a firm’s activities and market transactions must be compared with the costs of internalization activities, and that transactions should only be undertaken within that institutional arrangement (market or firm) which causes the lowest costs (Kaiser and Obermaier, 2020). Relating the transaction cost theory to this study, the theory guides companies in deciding which activities to integrate and those to be outsourced. To decide which activities should be integrated or outsourced are fundamental decisions for a firm i.e. choosing between market or hierarchy or something in between (hybrid) and thereby minimizing transaction costs (Williamson, in Kaiser & Obermaier, 2020). Picot and Franck in Kaiser and Obermaier (2020) added that such transactions should be internalized (i.e. vertically integrated) that are characterized by a high degree of asset specificity and uncertainty accompanied by a high degree of frequency, otherwise a firm should choose the market or a hybrid form. The choice of alternative depends on minimizing the costs that arise in the presence of transaction specific investments and uncertainty (Isaksen & Dreyer, 2000). Joskow (1988) identified a wide range of transactions which range from merely spot market to only internal transactions. Here, transactions are classified based on whether they take place in the firm or across different markets. Recurring exchanges that involve transaction between specific capital and efficient information processing makes market alternatives more hazardous. The firm provides a suitable alternative because the common ownership of physical capital discourages opportunism between owners, and this forms the basis for efficient information transfer and long-term relationship between the firm and its employees (Isaksen & Dreyer, 2000). Transaction cost theory emerged based on the risks and uncertainty associated with exploiting the market for the allocation of resources between adjacent stages in the value chain. This motivates firms to engage in “making” instead of “buying” and “using” instead of “selling” (Isaksen et al, 2011). Transaction costs consideration is very important in organizing economic activity and there would be reason for business firms to exist if we could foresee the future perfectly and were not cost in negotiating and renegotiating long-term contracts (Azzam & Paguo in Isaksen et al, 2011). The transaction cost approach focuses on the phenomenon associated with vertical integration as it occurs under conditions of transaction-specific investments, high transaction frequency and uncertainty (Romme, 1990). However, the main factor which Williamson in Romme (1990) attributes integration is the condition of assets or transaction specificity. Under the condition of transaction-specific investments, a company investing in transaction-specific assets will be vulnerable to opportunistic behaviour of its suppliers or buyers. Kaiser and Obermaier (2020) noted that most of a firm’s activities are characterized by a different degree of assets specificity. If a firm decides to integrate or outsource all of these activities, then the level of transaction costs would not be as low as possible, as some activities should be outsourced (those characterized by low asset specificity) while others should be internalized (those characterized by high asset specificity) (Williamson, in Kaiser & Obermaier, 2020). The transaction cost economics theory emphasizes that vertically integrated firms will have lower costs than firms that buy in an open market (Isaksen & Dreyer, 2000). The theory explains that the firm will integrate when the costs of transacting over markets outweigh internal costs of management (Levy, in Isaksen & Dreyer, 2000). Levy in Isaksen and Dreyer (2000) stated that factors such as internal costs of management, transaction-specific investments, flow economics, small numbers bargaining problems and conditions of uncertainty greatly impact on the degree of vertical integration within an industry. The transaction cost view plays an important role in understanding the economic costs/ benefits of vertical integration (Whinston, 2001; Williamson, 2005; McIvor, 2009). The aim of vertical integration strategy is to eliminate or reduce the selling and buying costs incurred when two separate companies own two stages of the supply chain and perhaps reduce physical handling costs (Rothaermel et al, 2006). Williamson (2005) noted that a company that produces or manufactures integrated circuits and finished goods operates with no or little salesforce, market research, sales promotion and advertising. Another manufacturing company that produces and sells these integrated circuits and finished goods to independent customers would also need to perform these activities. ## Empirical Review Some related empirical studies have been conducted on backward integration and organizational effectiveness. For instance, Hamdaoui and Bouayad (2019) investigated the determinants and directs of vertical integration on the performance of Moroccan manufacturing firms. Their study employed the qualitative research approach and descriptive survey research design where data were collected from managers in Moroccan manufacturing industry using questionnaire. The data collected from the respondents were analyzed statistically using percentage and frequency analysis while the hypotheses were tested using t-test and regression analysis. The findings showed that the degree of vertical integration is correlated to market factors. The study also revealed that the degree of integration of industries is explained by the basic conditions and structures of the industrial sector particularly the degree of capital intensity, degree of concentration, economies of scale, the level of barriers to entry, and rate of sales growth. The study equally reported a negative relationship between vertical integration and profitability of industrial firms. Isaksen et al (2011) carried out a study to determine the impact of vertical integration on performance in the Norwegian fish processing industry. The researchers adopted the cross-sectional research design survey and used a structured questionnaire to collect data from general managers in the fishery industry. The data collected were analyzed using descriptive statistics such as percentage and frequency table, mean and standard deviation while the formulated hypotheses were tested using Ordinary Least Square (OLS) regression and Pearson Product Moment Correlation Coefficient. The findings showed a variation in the vertical integration-performance relationship across the fish processing industry in Norway. The study reported that vertical integration had reverse but insignificant effects on the two measures of profitability (return on investment and profit margin). The study revealed that vertical integration seems to increase profit margins while return on investment decreases. The study also revealed that the use of vertical integration is not an easy strategy to comprehend due to the multiple ways to organizing the seller-buyer relationship and the variety of firms operating within this geographic location. Louca and Panavides (2016) examined the impact of vertical integration on inventory turnover and operating performance in Pakistan. The researchers developed a causal model and used it to determine the effects of vertical integration on three types of inventories namely; raw materials inventory, work in progress, and finished goods. Their model was used to test the relationship between vertical integration and performance measures (cost reduction, return on sales and profit margin). The result revealed that vertical integration has a positive impact on cost reduction, return on sales and profit margin. Shah et al (2020) explored the impact of vertical integration and outsourcing decision on firm performance. The researcher adopted the descriptive survey research design and the qualitative research approach. Data was collected from different procurement managers and operational managers of companies working in the KPK. The researchers used a structured interview question to elicit data from the respondents. The results of the interview conducted among procurement managers and operational managers of companies working in the KPK showed that outsourcing is the best strategy to improve organizational performance rather than vertical integration strategies. Pieri and Zaninotto (2013) carried out research to determine the relationship between vertical integration and efficiency in the Italian machine tool industry. The researchers adopted the survey research design where data were collected from novel panel dataset comprising 500 machine tool firms in Italy. The researchers applied two equations and instrumental variables for the two directions of causality. After analyzing the data, the researchers found out that self-selection mechanism of the most efficient firms in vertically integrated structures while organizational mode does not have any effect on firm’s efficiency. Peyrefitte et al (2002) empirically examined the relationship between vertical integration and economic performance of manufacturing firms. Their study adopted the exploratory research design and the qualitative research approach where structured questionnaire was used to collect data from 53 managers in 20 manufacturing companies that adopt vertical integration in Netherlands. The data collected were analyzed statistically using percentage and frequency tables, bar charts and pie charts while the hypotheses were tested using the Pearson Product Moment Correlation Coefficient. After analyzing the data collected, the researchers found a significant positive relationship between vertical integration and profitability of manufacturing firms. The study also found a significant positive relationship with cost reduction of manufacturing firms. Wellstone (2000) examined the relationship between vertical integration and economies of scale in product information distribution. The researcher adopted the correlational survey research design and the quantitative research approach where data were collected from managers of automobile companies in United States of America (USA). The researcher used a structured questionnaire to collect data from the respondents. The data collected were analyzed using descriptive statistics such as percentage and frequency tables, graphs, charts, mean and standard deviation, while the regression analysis and ANOVA were used to test the hypotheses. The finding showed a positive and significant relationship between relationship economies and information gathering about product. The study also found a significant relationship between vertical integration and product information distribution. The study however concluded that vertical integration significantly enhances economies of scale in product information distribution. ## Gap in Reviewed Literature From the literature reviewed, it was observed that most of the studies conducted on backward integration strategy of business firms were carried out in Malaysia, United States, Netherlands, Germany, Pakistan, Sweden, Erbil/Iraq, Japan, United Kingdom (UK), Morocco and Norway while empirical studies that examined backward integration strategies and organizational effectiveness in Nigeria are limited. Secondly, it was observed that none of the previous studies specifically focused on backward integration strategy, or relate backward integration to effectiveness (productivity, sales growth and profitability) of food and beverage manufacturing firms in South-South Nigeria. Most of the previous studies on backward integration relate the concept to firm performance, outsourcing, economies of scale and efficiency of firms while empirical studies that examined the relationship between backward integration and effectiveness of food and beverage manufacturing firms in South-South Nigeria are limited. This has created a gap in literature that needs to be filled. In attempt to fill this gap in literature, this study explored the relationship between backward integration and effectiveness of food and beverage manufacturing firms in South-South Nigeria. # Methodology This study adopted the survey research design. The population of this study consisted of all the seventy (70) registered food and beverage manufacturing firms in the South-South Geopolitical Zone of Nigeria (South-South Nigeria Directory Website, <http://www.directory.org.ng>). The seventy (70) registered food and beverage manufacturing firms were spread across the six States in the South-South Geopolitical Zone namely, Akwa Ibom State, Cross River State, Delta State, Edo State, Bayelsa State and Rivers State. However, the accessible population was limited to thirty (30) selected food and beverage manufacturing firms in South-South Nigeria. The population elements were made up of managers of the food and beverage manufacturing firms in South-South Nigeria. The managers include top level managers, middle level managers and lower-level managers. A population of 508 managers (comprising 99 top level managers, 168 middle level managers and 241 lower-level managers) were identified in the 30 selected food and beverage manufacturing firms in South-South Nigeria (Source: HR Department of the Selected Companies). A sample size of 224 managers was used for the study. The Taro Yamane’s formula was used to determine the sample size. The main instrument used for data collection was a questionnaire. The questionnaire was structured on a 5-point Likert type scale namely: Strongly Agree (SA), Agree (A), Undecided (U), Disagree (D) and Strongly Disagree (SD). The validity of the instrument was determined through face and content analysis while its reliability was tested using Cronbach Alpha reliability test method. The questionnaire was administered to the respondents (managers) of the selected food and beverage manufacturing firms in South-South Nigeria. A total of 224 questionnaires were administered to the respondents and 188 copies were collected. The data collected were analyzed using descriptive statistics while the hypotheses were tested using the Pearson Product Moment Correlation Coefficient (r). The r value was computed using the SPSS software program version 23. # Results and Discussion The data collected on backward integration was correlated with those data obtained on productivity, sales growth and profitability of food and beverage manufacturing firms in South-South Nigeria. The analysis was done with the aid of the SPSS software program version 23.0. The results of the correlation analysis are presented in the tables below: <div class="table*"> <div class="adjustbox"> max width= | | | Backward Integration | Productivity | |:---|:---|:--:|:--:| | Backward Integration | Pearson Correlation coefficient | 1.000 | .823\*\* | | | Sig. (2 tailed) | \- | .001 | | | N | 188 | 188 | | Productivity | Pearson Correlation coefficient | .823\*\* | 1.000 | | | Sig. (2 tailed) | .001 | \- | | | N | 188 | 188 | </div> <div class="flushleft"> \* Correlation is significant at 0.01 levels (2 tailed).\ Source: SPSS-Generated Output, 2025. </div> </div> Table 1 presents the result of the bivariate analysis performed between backward integration and productivity of food and beverage manufacturing firms in South-South Nigeria. The result indicates that backward integration has a very strong positive correlation with productivity of food and beverage manufacturing firms in South-South Nigeria (r = .733\*\*) and the symbol \*\* signifies that this correlation is significant at 0.01 level. Based on this result, the null hypothesis (Ho$`_1`$) is rejected, and the alternate hypothesis is accepted. This means that there is a very strong positive and significant relationship between backward integration and productivity of food and beverage manufacturing firms in South-South Nigeria. <div class="table*"> <div class="adjustbox"> max width= | | | Backward Integration | Sales Growth | |:---|:---|:--:|:--:| | Backward Integration | Pearson Correlation coefficient | 1.000 | .652\*\* | | | Sig. (2 tailed) | \- | .001 | | | N | 188 | 188 | | Sales Growth | Pearson Correlation coefficient | .652\*\* | 1.000 | | | Sig. (2 tailed) | .001 | \- | | | N | 188 | 188 | </div> <div class="flushleft"> \* Correlation is significant at 0.01 levels (2 tailed).\ Source: SPSS-Generated Output, 2025. </div> </div> Table 2 contains the result of the bivariate analysis carried out between backward integration and sales growth of food and beverage manufacturing firms in South-South Nigeria. The result indicates that backward integration is strongly and positively correlated to sales growth of food and beverage manufacturing firms (r = .652\*\*) and this correlation is significant at 0.01 level as indicated by the symbol \*\*. Consequently, the null hypothesis (H0$`_2`$) is rejected and the alternate hypothesis is accepted. This means that we accept that there is strong positive and significant relationship between backward integration and sales growth of food and beverage manufacturing firms in South-South Nigeria. <div class="table*"> <div class="adjustbox"> max width= | | | Backward Integration | Profitability | |:---|:---|:--:|:--:| | Backward Integration | Pearson Correlation coefficient | 1.000 | .614\*\* | | | Sig. (2 tailed) | \- | .001 | | | N | 188 | 188 | | Profitability | Pearson Correlation coefficient | .614\*\* | 1.000 | | | Sig. (2 tailed) | .001 | \- | | | N | 188 | 188 | </div> <div class="flushleft"> \* Correlation is significant at 0.01 levels (2 tailed).\ Source: SPSS-Generated Output, 2025. </div> </div> Table 3 shows the result of the bivariate analysis carried out between backward integration and profitability of food and beverage manufacturing firms in South-South Nigeria. The result indicates that backward integration has a strong positive correlation with profitability of food and beverage manufacturing firms (r = .614\*\*) and this correlation is significant at 0.01 level as signified by the symbol \*\*. As a result of this, the null hypothesis (H0$`_3`$) is rejected, and the alternate hypothesis is accepted. This implies that we then accept that there is strong positive and significant relationship between backward integration and profitability of food and beverage manufacturing firms in South-South Nigeria. ## Discussion of Findings This study found a very strong positive and significant relationship between backward integration and productivity of food and beverage manufacturing firms in South-South Nigeria. This finding was derived from the result of the bivariate analysis carried out on the two variables in the first hypothesis. The result revealed that backward integration has a very strong positive correlation with productivity of food and beverage manufacturing firms in South-South Nigeria (r = .733\*\*) and this correlation is significant at 0.01 level. Based on this result, the null hypothesis (Ho$`_1`$) was rejected, and the alternate hypothesis was accepted. This means that there is a very strong positive and significant relationship between backward integration and productivity of food and beverage manufacturing firms in South-South Nigeria. This finding is supported by Cole-Ingail (2008) and Hamdaoui and Bouayad (2019) as both studies reported that backward integration strategy enables firms to increase their productivity. This study found a strong positive and significant relationship between backward integration and sales growth of food and beverage manufacturing firms in South-South Nigeria. This finding was deduced from the result of the bivariate analysis carried out on the two variables in the second hypothesis. The result revealed that backward integration is strongly and positively correlated to sales growth of food and beverage manufacturing firms (r = .652\*\*) and this correlation is significant at 0.01 level. Consequently, the null hypothesis (H0$`_2`$) was rejected, and the alternate hypothesis was accepted. This means that we then accepted that there is strong positive and significant relationship between backward integration and sales growth of food and beverage manufacturing firms in South-South Nigeria. This finding is supported by Cainelli and Iacobucci (2014) and Bresnahan and Levin (2008) as both studies revealed that companies that integrate backwardly expand their market share and grow their sales. Finally, it was discovered that backward integration has a strong positive and significant relationship with profitability of food and beverage manufacturing firms in South-South Nigeria. This finding emerged the result of the bivariate analysis carried out on the two variables in the third hypothesis. The result revealed that backward integration has a strong positive correlation with profitability of food and beverage manufacturing firms (r = .614\*\*) and this correlation is significant at 0.01 level. As a result of this, the null hypothesis (H0$`_3`$) was rejected, and the alternate hypothesis was accepted. This implies that we then accepted that there is strong positive and significant relationship between backward integration and profitability of food and beverage manufacturing firms in South-South Nigeria. This finding is supported by Kenton (2021) and Peyrefitte, Golden & Brice (2002) as both studies confirmed that backward integration strategy significantly increases the profitability of firms. # Conclusion and Recommendations ## Conclusion This study explored backward integration and effectiveness of food and beverage manufacturing firms in South-South Nigeria. The empirical results of this study confirmed this as backward integration was found to have a significant relationship with productivity of food and beverage manufacturing firms in South-South Nigeria. The study also found a significant relationship between backward integration and sales growth of food and beverage manufacturing firms in South-South Nigeria. The study equally discovered a significant relationship between backward integration and profitability of food and beverage manufacturing firms in South-South Nigeria. Based on these findings, it is concluded that backward integration significantly enhances the effectiveness of food and beverage manufacturing firms in South-South Nigeria. ## Recommendations The following recommendations are provided for this study: 1. That, food and beverage manufacturing firms in South-South Nigeria should adopt backward integration strategy as it would enhance their effectiveness in terms of achieving their set goals and objectives. 2. That, food and beverage manufacturing firms in South-South Nigeria especially those that are experiencing low productivity should integrate backwardly along their supply chain as it would expand their business operations and increase their productivity. 3. That, food and beverage manufacturing firms in South-South Nigeria especially those that are experiencing shortage in the supply of raw materials should embrace backward integration by becoming the supplier of their own raw materials as it would not only ensure smooth flow of the production process but would also increase their sales volume of their firm. 4. That, food and beverage manufacturing firms in South-South Nigeria should integrate backwardly along their supply chain network as it would increase the profitability of their firm. 5. Finally, it is recommended that food and beverage manufacturing firms in South-South Nigeria should exploit the market opportunities in the supply chain network by integrating backwardly as it would facilitate business growth.

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