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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. We shed light on the inconclusiveness of results regarding the effects of common ownership on markups in the existing literature by exploiting industry technology classifications by the European Commission. Using a rich panel of European manufacturing firms from 2005 to 2016, we structurally infer markups and construct a measure of common ownership. Combining propensity score matching with a difference-in-differences estimator, we find an increase of firm markups by 3.1% after the first exposure tocommon ownership. While this effect is strongly pronounced in low-tech industries, we find no effect on markups in high-tech industries. In contrast, we measure a positive effect of common ownership on innovation activity in high-tech industries and no effectin low-tech industries. Both findings are consistent with recent theoretical findings in Lopéz and Vives (2019).

Suggested Citation

  • Gibbon, Alexandra J. & Schain, Jan Philip, 2020. "Rising markups, common ownership, and technological capacities," DICE Discussion Papers 340, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    • Handle: RePEc:zbw:dicedp:340
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    2. Wang, Shuangjin & Zhang, Xiaoqian & Cebula, Richard J. & Foley, Maggie, 2024. "Cross-shareholding, Managerial capabilities, and Strategic risk-taking in enterprises: A game or a win-win?," Finance Research Letters, Elsevier, vol. 62(PB).
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    5. Nuria Boot & Jo Seldeslachts & Albert Banal Estañol, 2022. "Common ownership: Europe vs. the US," Working Papers of Department of Management, Strategy and Innovation, Leuven 700180, KU Leuven, Faculty of Economics and Business (FEB), Department of Management, Strategy and Innovation, Leuven.

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    More about this item

    Keywords

    Competition; Common Ownership; Market Power; Industry Structure; Antitrust; Innovation;
    All these keywords.

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • 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
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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