Transaction cost economics (TCE) has guided a variety of research on governance in the strategic management literature. An important question arises, however, as to whether the TCE framework is equally appropriate in all industry settings. This article proposes that vertical integration will have different governance efficiency for specific assets in different industries. The vertical integration is more efficient in industry of lower technological input. Data from Chinese A share listed manufacturing firms during 20072009 provide support for our hypotheses that transaction cost factors are better at explaining integration and specific assets for firms in low technological input industry than for firms in high technological input industry. Our result indicates when we use TCE framework explain integration decisions, we must augment industry settings. These findings also have profound practical implications.