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Horizontal Partial Cross Ownership and Innovation

Author

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  • Shelegia, Sandro
  • Spiegel, Yossi

Abstract

We study the effects of partial cross ownership (PCO) among rival firms on their incentives to innovate. PCO in our model gives rise to a price effect due to its effect on price competition and hence on the marginal benefit from investment, as well as a cannibalization effect which arises because each firm internalizes part of the negative externality of its investment on the rival's profit. We show that overall, PCO may benefit or harm consumers depending on the size of the PCO stakes, their degree of symmetry, the size of the innovation, its marginal cost, and whether it is drastic or not.

Suggested Citation

  • Shelegia, Sandro & Spiegel, Yossi, 2024. "Horizontal Partial Cross Ownership and Innovation," CEPR Discussion Papers 18968, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:18968
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    Cited by:

    1. Dongdong Li & Xiaochan Yan & Yue Zhang, 2025. "Cross‐ownership and environmental R&D risk choices in a differentiated duopoly," International Journal of Economic Theory, The International Society for Economic Theory, vol. 21(4), pages 473-493, December.
    2. Pal, Rupayan & Petrakis, Emmanuel, 2025. "Partial passive ownership holdings destabilizing collusion," Economics Letters, Elsevier, vol. 257(C).
    3. Lefouili, Yassine & Madio, Leonardo, 2026. "Mergers and investments: Where do we stand?," International Journal of Industrial Organization, Elsevier, vol. 105(C).
    4. Swapnendu Banerjee & Arijit Mukherjee & Sougata Poddar, 2025. "Product differentiation, demand expansion and the welfare effects of cross‐ownership," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 58(1), pages 193-226, February.
    5. Zhang, Chuyuan & Lee, Sang-Ho, 2026. "Common ownership and green managerial delegation contract in a vertically related market," MPRA Paper 128009, University Library of Munich, Germany.
    6. Bui, Dang-Long & Peng, Cheng-Hau & Lin, Yan-Shu, 2025. "On the implications of cross-ownership under green transformation," Energy Economics, Elsevier, vol. 148(C).
    7. Mingqing Xing & Sang‐Ho Lee, 2026. "Cross‐Ownership and Welfare‐Inferior Price Competition with Relative Profit Delegation Contracts," Bulletin of Economic Research, Wiley Blackwell, vol. 78(3), pages 559-572, July.

    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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