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

Listed author(s):
  • Neslihan Aydogan


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

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