Acquisitions,entry, and innovation in oligopolistic network industries

In industries with network effects, incumbents' installed bases create barriers to entry that discourage entrepreneurs from developing new innovations. Yet, entry is not the only commercialization route for entrepreneurs. We show that the option of selling to an incumbent increases the innovation incentives for entrepreneurs when the network effects are strong and incumbents compete to preemptively acquire innovations. Thus, we establish that network effects and installed bases do not necessarily restrict the innovation incentives and that network effects promote acquisitions over entry.     

Tying in evolving industries,when future entry cannot be deterred

We show that the incentive to engage in exclusionary tying (of two complementary products) may arise even when tying cannot be used as a defensive strategy to protect the incumbent’s dominant position in the primary market. By engaging in tying, an incumbent firm sacrifices current profits but can exclude a more efficient rival from a complementary market by depriving it of the critical scale it needs to be successful. In turn, exclusion in the complementary market allows the incumbent to be in a favorable position when a more efficient rival will enter the primary market, and to appropriate some of the rival’s efficiency rents. The paper also shows that tying is a more profitable exclusionary strategy than pure bundling, and that exclusion is the less likely the higher the proportion of consumers who multi-home.     

Foreign entry and firm R&D: evidence from Chinese manufacturing industries

By making use of firm‐level panel data from 2005 to 2007, this paper empirically examines the relationship between research and development (R&D) behaviour and the presence of foreign firms in China's four major manufacturing industries. The manufacturing industries considered are (1) car manufacturing, (2) household electrical appliances, (3) electronics and (4) communication equipment manufacturing. We find that the presence of foreign firms has resulted in a significant increase in R&D intensity of all four manufacturing industries in China. While the average R&D intensity in communication equipment manufacturing is the highest, the electronics industry, which has the highest level of foreign presence, has experienced a relatively large increase in R&D intensity. This suggests that China's electronics manufacturing sector is responding to rising competition from foreign firms located in China. Foreign presence in China's car manufacturing sector is relatively small, and this industry has experienced a relatively small increase in R&D intensity because of foreign presence.     

Net entry behaviour in Greek manufacturing: consumer, intermediate and capital goods industries

This research explores the nature and causes of net entry of firms in three groups of Greek manufacturing industries–consumer, intermediate and capital goods. The research questions whether or not the determinants of net entry rates across sectors are different. Econometric analyses reveal that, indeed, there are significant differences in the determinants of net entry rates across industry groups, but also there is strong within-group correlation across sectors.     

Mergers with future rivals can boost prices,bar entry,and intensify market concentration

It is theoretically shown that mergers between incumbents and future rivals can boost prices and harm consumers. But in the absence of empirical evidence, no merger has been litigated on this basis. To offer empirical insights, I study the acquisition case of a promising future rival by a large incumbent pharmaceutical firm. First, there is strong and causal evidence that the merger has enabled higher prices for the incumbent. Mergers with future rivals are practically unregulated and, if wisely exploited, they can circumvent antitrust enforcement and serve as entry barriers. Second, in contrast to the mainstream prediction that mergers with future rivals do not alter market concentration, I report a large post-merger increase in the market concentration. I introduce advertisement expenditure as a possible channel of effect between the merger and market concentration. Third, I document spillover effect of the merger on the incumbent's immediate rivals without affecting its distant rivals.     

Exploring the sociocultural determinants of de novo versus de alio entry in emerging industries

The influence of institutional factors on firm entry has long interested strategy scholars. However, we have limited understanding of how the sociocultural environment, defined as the unwritten, decentralized “rules of the game,” influences founding rates in emergent industries; we know even less about how these noneconomic factors differentially influence entry by new entrepreneurial (de novo) firms versus diversifying incumbent (de alio) firms. Utilizing a unique dataset on entry in the green building supply industry, we find that, while economic and policy factors are highly correlated with de alio entry, the sociocultural environment exerts a greater influence on de novo firms. Our findings contribute to the literature on corporate demography, institutions and entrepreneurship, and industry emergence. Copyright © 2013 John Wiley & Sons, Ltd.     

The determinants of entry and exit rates into U.S. manufacturing industries

Entry and exit rates are examined across a fairly large sample of 4-digit U.S. manufacturing industries. Market growth significantly increases (reduces) entry (exit) rates. Profits increase entry rates. Advertising clearly acts as an entry barrier. Sunk capital costs seem to deter exit. While entry and exit rates are related in the sample, whether they are simultaneously determined is unclear.     

The learning curve,technology barriers to entry,and competitive survival in the chemical processing industries

This paper evaluates entry and survival rates in a sample of 39 chemical product industries. The analysis focuses on learning-based cost advantages potentially held by incumbent firms. A logit model of entry gives no evidence that entry decisions were sensitive to the cumulative production lead held by incumbents. Entry was facilitated by the fact that for most products, technology was available from a range of sources. A hazard function model reveals that entrant survival rates were unrelated to order of entry or source of process technology. However, survival was adversely affected when the leading incumbent held a large cumulative output advantage or when entrants built plants of sub-optimal scale. Thus, a large incumbent lead in production experience did not deter new entry but did reduce the entrant'S probability of survival.     

Mergers and coordinated effects

A merger is said to have coordinated effects if it results in more collusive outcomes. I review the theory of collusion, and the role played by communication in coordination. Mergers can affect the enforcement and participation constraints for a collusive agreement, and the selection from the equilibrium set of outcomes. I describe some recent empirical studies of the effects of mergers on collusion, and the underlying measurement issues associated with identifying the degree of coordination. I also discuss some recent cases in which coordinated effects were a concern, including both merger reviews and ex post investigations.     

Bundling of substitutes or complements

The Adams-Yellen two good bundling framework is generalized to allow the goods to be substitutes or complements. General theorems on price change effects are given. A monopolist may find it most profitable to offer the goods only as a bundle, even if they are (imperfect) substitutes, or to not bundle the goods, even if they are complements. If one good is competitively sold, a monopoly producer of the other good can never increase profits by offering his good only as part of a bundle. However, such a monopolist might profitably offer his good in both bundled and unbundled form to price discriminate, even if the two goods are substitutes.     

Economic Analyses of Mergers at the FTC: The Cruise Ships Mergers Investigation

This paper provides an overview of how economists atthe Federal Trade Commission assess the potentialcompetitive effects of mergers, with a focus on thetypes of quantitative analyses frequently employed.The paper first outlines the general approach employedat the Federal Trade Commission to review mergers.The paper then describes analyses done in theinvestigation of proposed mergers in the cruiseline industry as a specific example. Of particularinterest in this example are the analyses used toassess the potential for coordinated interaction asa result of the merger.     

Mergers,acquisitions and control of telecommunications firms in Europe

New evidence is presented about 12 large acquisitions by telecommunications firms in Europe. The average effect on acquirers’ shareholder value is not significantly different from zero, which confirms a paradox found by previous studies: bidding firms’ shareholders do not benefit from takeovers. There is high dispersion in the results. This suggests that detailed studies may uncover important aspects of the constraints that exist in the corporate control market of telecommunications firms. A case study of the Spanish firm Telefonica suggests that corporate governance problems and political intervention are significant components of these “agency” constraints.     

Trade Union Mergers in British and Australian Television Broadcasting

A complex set of forces facing trade union organizations has meant that union restructuring vis-à-vis merger activity has been a prominent feature of many Western labour movements in the 1980s and 1990s. This paper is located in these structural developments, and its main contribution lies in the insights provided by an in-depth examination of recent union merger activity in commercial television in the UK and Australia. In contrast to the work of Undy et al . (1981), the results suggest that union mergers are influenced by more than changes in membership patterns, and that the delineation of merger categories may be far more complex than what has previously been identified by their model. It is argued, too, that the nature of the forces and the processes that led to the broadcasting union mergers in the UK and Australia were significantly influenced by the different institutional contexts of both countries. Finally, and related to this, it would appear that union merger outcomes (at least in the short term) are linked to the preceding processes by which merger is brought about. One policy implication of this is that anything other than a case-by-case evaluation of union mergers may be misleading.     

Industry Change and Union Mergers in British Retail Finance

This paper investigates the reasons for and implications of the recent merger between three of the largest unions in the retail finance sector, creating UNIFI. Recent union mergers have been explained by environmental changes adversely affecting membership and finances. These prompt leaders to consider merger as an appropriate organizational solution. Mergers are successfully concluded when leaders are able to overcome internal resistance and develop acceptable outcomes. We examine whether these factors are sufficient to explain how the merger between the national banking union and two large company‐based staff unions was concluded, given longstanding institutional rivalry.     

Entry and exit in Dutch manufacturing industries

The purpose of this paper is to analyse entry and exit of establishments in 71 3-digit industries in Dutch manufacturing between 1986 and 1990. A distinction is made between existing firm entry and new firm entry and between general exit and exit by bankruptcy. The incentive effect of profitability and the barrier effect of capital intensity and advertising intensity appear to be stronger for new firm entry than for existing firm entry. Growth and capital intensity turn out to reduce exit by bankruptcy, whereas R&D intensity reduces general exit. The positive impact of general exit on new firm entry and vice versa points to replacement and displacement.An earlier version of this paper was presented at the 21st annual EARIE conference, Crete, Greece, September 4–6, 1994. We thank David Audretsch, Martin Carree, Roy Thurik and participants of the conference for valuable comments.     

Mapping information industries and markets

This paper outlines the development and evolution of a framework for analysing the information industries, which can encompass a range of industry and market statistics and provide a model capable of generating insights into the relationships between products, services, markets and industries in the information sector. Conceptual strands leading towards the development of various information industry maps are traced and key contributions to current information industry maps noted. The bases for, and subsequent developments of, the Australian IT Map are outlined, and examples of its application are presented in order to give some indication of the potential of such tools and techniques.     

Knowledge Spillovers,Mergers and Public Policy in Economic Clusters

This paper investigates how market concentration affects research activity in an economic cluster. The firms in the cluster play a two-stage game. In the first stage the firms choose whether or not to engage in costly research that generates technological improvements that spill over to the other firms in the cluster. The more firms engaged in research the richer or more profitable is the pool of knowledge that spills over. In the second stage after the knowledge spillovers have occurred, firms compete in quantities. We solve for the symmetric mixed strategy equilibrium to the first stage of the game, and find that too low a degree of concentration in the cluster will destroy firms' incentives to undertake research and so the cluster risks stagnation. We explore whether a merger can stimulate research activity by increasing concentration in the cluster. Finally, we consider a public policy response to stagnation and analyze whether a direct public subsidy to stimulate research is preferable to a self-financing arrangement.     

Supply chain environmental investments in dynamic industries: Comparing investment and performance differences with static industries

Research linking investments in environmental practices to firm performance has matured over the past years. However, empirical research is still ambiguous on how and whether investments in environmental practices improve a plant's performance. We believe that contingency factors, especially the industry in which plants act has a significant role in the success of environmental investments. Using empirical data collected across a wide range of industries our results indicate that plants competing in dynamic industries such as apparel do on average invest less in supply chain environmental practices compared to plants in static industries. In addition, these environmental investments do not significantly improve operational performance in dynamic industries in terms of cost, quality, delivery and flexibility. However, in static industries environmental investments do significantly improve a plant's operational performance in terms of cost, quality and flexibility.