Notes on the Merger Strategy of High versus Low-tech Industries: Complementarities and Moral Hazard

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Notes on the Merger Strategy of High versus Low-tech Industries: Complementarities and Moral Hazard

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Neslihan Aydogan () (School of Public Policy and Environmental Affairs, Indiana University, Bloomington)

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Neslihan Aydogan

Abstract

In this essay I assess the role that is played by the two characteristics of high-tech firms in shaping their corporate strategies: short product cycles and the involvement of intangible assets in production. Short product cycles impose high-tech firms to seek complementary assets for entering new markets quickly and compete. The involvement of intangible capital in high-tech production, on the other hand, is related to the distinguishing characteristic of high-tech industries for which R&D activities are observed frequently and firms employ a large proportion of scientists, engineers and technicians. In this essay, I hypothesize and show that as a result of these two characteristics high-technology firms are likely to engage in vertical mergers more often than low-technology firms and vertical mergers are likely to involve firms that employ intangible assets in production.

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Article provided by Economics Bulletin in its journal Economics Bulletin.

Volume (Year): 12 (2002)
Issue (Month): ()
Pages: 1-12
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Handle: RePEc:ebl:ecbull:eb-02l10005

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Find related papers by JEL classification:
L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

References listed on IDEAS
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Arora, Ashish, 1996. "Contracting for tacit knowledge: the provision of technical services in technology licensing contracts," Journal of Development Economics, Elsevier, vol. 50(2), pages 233-256, August. [Downloadable!] (restricted)
Audretsch, David B & Feldman, Maryann P, 1996. "R&D Spillovers and the Geography of Innovation and Production," American Economic Review, American Economic Association, vol. 86(3), pages 630-40, June. [Downloadable!] (restricted)
Geroski, P A, 1991. "Innovation and the Sectoral," Economic Journal, Royal Economic Society, vol. 101(409), pages 1438-51, November. [Downloadable!] (restricted)

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This page was last updated on 2009-11-16.

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