IDEAS home Printed from https://ideas.repec.org/p/wzb/wzebiv/spii2005-06.html
   My bibliography  Save this paper

The International Drivers of Domestic Airline Mergers in Twenty Nations: Integrating Industrial Organization and International Business

Author

Listed:
  • Joseph A. Clougherty

Abstract

The domestic airline merger phenomenon of the late 1980s and early 1990s sparked a great deal of Industrial Organization (IO) literature; yet, that literature neglected non-US domestic mergers and potential for international competitive gains. Using an International Business perspective to complement an IO analysis, I argue that factoring international competitive incentives helps explain domestic airline merger activity. A Cournot model of airline competition illustrates that domestic mergers, via enhanced domestic networks and reduced domestic competition, generate international competitive gains. Further, empirical tests - using a structural-equations approach on panel data covering international city-pair market segments - support domestic mergers improving international competitiveness. ZUSAMMENFASSUNG - (Was die inländischen Fluglinien in 20 Ländern zur Fusion getrieben hat. Eine integrierte industrieökonomische und betriebswirtschaftliche Analyse des internationalen Wettbewerbs) In der Industrieökonomik hat das Phänomen von Fusionen inländischer Fluggesellschaften in den späten 1980er und frühen 1990er Jahren viel wissenschaftliche Literatur angeregt. Die einschlägigen Forschungsarbeiten behandeln jedoch ausschließlich inländische Fusionen in den U.S.A. und lassen damit den Aspekt des internationalen Wettbewerbs außer Acht. In dieser Untersuchung, die die industrieökonomische Analyse um die Perspektive der internationalen Betriebswirtschaft ergänzt, wird gezeigt, dass die Anreize des internationalen Wettbewerb in das Erklärungsmodell für nationale Fusionen von Fluglinien integriert werden können. Anhand eines Cournot-Modells des Wettbewerbs zwischen Fluggesellschaften kann dargelegt werden, wie Fusionen zu einem erweiterten inländischen Netz an Flugverbindungen und verminderten Konkurrenzdruck im Inland führen und so die Position der fusionierten Fluglinie im internationalen Wettbewerb stärken. Dieses Ergebnis wird von empirischen Tests, die eine Struckturvergleichsmethode für Paneldaten über einen internationalen Städtevergleich der Marktsegmente verwenden, gestützt.

Suggested Citation

  • Joseph A. Clougherty, 2005. "The International Drivers of Domestic Airline Mergers in Twenty Nations: Integrating Industrial Organization and International Business," CIG Working Papers SP II 2005-06, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  • Handle: RePEc:wzb:wzebiv:spii2005-06
    as

    Download full text from publisher

    File URL: http://skylla.wz-berlin.de/pdf/2005/ii05-06.pdf
    File Function: Full text (original version)
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Windle, Robert J. & Dresner, Martin E., 1992. "Partial productivity measures and total factor productivity in the air transport industry: Limitations and uses," Transportation Research Part A: Policy and Practice, Elsevier, vol. 26(6), pages 435-445, November.
    2. Jan K. Brueckner, 2003. "International Airfares in the Age of Alliances: The Effects of Codesharing and Antitrust Immunity," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 105-118, February.
    3. Brander, James A. & Zhang, Anming, 1993. "Dynamic oligopoly behaviour in the airline industry," International Journal of Industrial Organization, Elsevier, vol. 11(3), pages 407-435, September.
    4. Kim, E Han & Singal, Vijay, 1993. "Mergers and Market Power: Evidence from the Airline Industry," American Economic Review, American Economic Association, vol. 83(3), pages 549-569, June.
    5. James A. Brander & Barbara J. Spencer, 1981. "Tariffs and the Extraction of Foreign Monopoly Rents under Potential Entry," Canadian Journal of Economics, Canadian Economics Association, vol. 14(3), pages 371-389, August.
    6. Clougherty, Joseph A., 2002. "US domestic airline mergers: the neglected international determinants," International Journal of Industrial Organization, Elsevier, vol. 20(4), pages 557-576, April.
    7. Brueckner, Jan K & Whalen, W Tom, 2000. "The Price Effects of International Airline Alliances," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 503-545, October.
    8. Brueckner, Jan K. & Spiller, Pablo T., 1991. "Competition and mergers in airline networks," International Journal of Industrial Organization, Elsevier, vol. 9(3), pages 323-342, September.
    9. Shy,Oz, 2001. "The Economics of Network Industries," Cambridge Books, Cambridge University Press, number 9780521805001.
    10. Morrison, Steven A & Winston, Clifford, 1987. "Empirical Implications and Tests of the Contestability Hypothesis," Journal of Law and Economics, University of Chicago Press, vol. 30(1), pages 53-66, April.
    11. Brueckner, Jan K & Spiller, Pablo T, 1994. "Economies of Traffic Density in the Deregulated Airline Industry," Journal of Law and Economics, University of Chicago Press, vol. 37(2), pages 379-415, October.
    12. Cason, Timothy N., 1994. "The strategic value of asymmetric information access for cournot competitors," Information Economics and Policy, Elsevier, vol. 6(1), pages 3-24, March.
    13. Joseph A Clougherty, 2001. "Globalization and the Autonomy of Domestic Competition Policy: An Empirical Test on the World Airline Industry," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 32(3), pages 459-478, September.
    14. Panzar, John C & Willig, Robert D, 1981. "Economies of Scope," American Economic Review, American Economic Association, vol. 71(2), pages 268-272, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Joseph A. Clougherty & Anming Zhang, 2009. "Domestic rivalry and export performance: theory and evidence from international airline markets," Canadian Journal of Economics, Canadian Economics Association, vol. 42(2), pages 440-468, May.
    2. repec:spr:infosf:v:9:y:2007:i:2:d:10.1007_s10796-007-9026-7 is not listed on IDEAS
    3. repec:eee:retrec:v:66:y:2017:i:c:p:12-25 is not listed on IDEAS
    4. Melnik, Arie & Shy, Oz & Stenbacka, Rune, 2008. "Assessing market dominance," Journal of Economic Behavior & Organization, Elsevier, vol. 68(1), pages 63-72, October.
    5. Anming Zhang & Yimin Zhang & Joseph A. Clougherty, 2011. "Competition and Regulation in Air Transport," Chapters,in: A Handbook of Transport Economics, chapter 35 Edward Elgar Publishing.

    More about this item

    Keywords

    airline-mergers; imperfect-competition; international-determinants;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wzb:wzebiv:spii2005-06. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jennifer Rontganger). General contact details of provider: http://edirc.repec.org/data/cicwzde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.