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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

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

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    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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    File URL: http://www.accessecon.com/pubs/EB/2002/Volume12/EB-02L10005A.pdf
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    Bibliographic Info

    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 12 (2002)
    Issue (Month): 7 ()
    Pages: 1-12

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    Handle: RePEc:ebl:ecbull:eb-02l10005

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    Keywords: complementarities;

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    1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    2. 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.
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