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Rising markups, common ownership, and technological capacities

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  • Gibbon, Alexandra J.
  • Schain, Jan Philip

Abstract

This paper analyses the impact of common ownership on markups and innovation and adds to the discussion of the recently observed patterns of a long term rise in market power. Using a panel of European manufacturing firms from 2005 to 2016, we structurally infer markups and construct a measure of common ownership. We use a propensity score reweighting estimator to eliminate biases due to observational characteristics and find an increase of firm markups ranging up to 3.3% on average in industries with high technological spillovers after the first exposure to common ownership. For companies directly held by common institutional investors, we also measure a positive effect on citation-weighted patents of up to 9.6% in high-spillover industries on average. Both findings are consistent with recent theoretical findings in López and Vives (2019).

Suggested Citation

  • Gibbon, Alexandra J. & Schain, Jan Philip, 2023. "Rising markups, common ownership, and technological capacities," International Journal of Industrial Organization, Elsevier, vol. 89(C).
    • Handle: RePEc:eee:indorg:v:89:y:2023:i:c:s0167718722000753
    DOI: 10.1016/j.ijindorg.2022.102900
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    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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