Market Power versus Efficiency Effects of Mergers and Research Joint Ventures: Evidence from the Semiconductor Industry
AbstractMerger control authorities may approve a merger based on an "efficiency defense." An important aspect in clearing mergers is that the efficiencies need to be merger-specific. Joint ventures, and in particular research joint ventures (RJVs), may achieve comparable efficiencies possibly without the anticompetitive (market power) effects of mergers. We empirically account for the endogenous formation of mergers and RJVs and provide evidence that at the semiconductor level, mergers and RJVs achieve dominant (net) efficiency effects. Our counterfactuals provide evidence that the efficiency gains caused by mergers would have been achieved by RJVs as well. Therefore, RJVs often represent viable alternatives to mergers from the consumer welfare point of view. At the more disaggregate level we find that the efficiency effects are larger in the microcomponents than in the memory market. This finding emphasizes the importance of market determinants (such as product differentiation and entry) having an impact on efficiency and market power effects. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
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Bibliographic InfoArticle provided by MIT Press in its journal The Review of Economics and Statistics.
Volume (Year): 89 (2007)
Issue (Month): 4 (November)
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- Ralph Siebert & Klaus Gugler, 2004. "Market Power versus Efficiency Effects of Mergers and Research Joint Ventures: Evidence from the Semiconductor Industry," NBER Working Papers 10323, National Bureau of Economic Research, Inc.
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L49 - Industrial Organization - - Antitrust Issues and Policies - - - Other
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