|
on Industrial Competition |
| By: | Salomé Baslandze |
| Abstract: | This working paper reviews recent empirical evidence on large firms and nonproductive strategies that hinder creative destruction and reallocation. The focus is on three types of nonproductive strategies: political connections, nonproductive patenting, and anticompetitive acquisitions. Across different contexts using granular micro data sets, we overwhelmingly see that as firms gain market share, they increasingly rely on nonproductive strategies but reduce their productive, innovation-based strategies. I also discuss theoretical channels, aggregate implications, and potentials for some policies. |
| Keywords: | creative destruction; innovation; growth; patents; political connections; firm dynamics |
| JEL: | O3 O4 |
| Date: | 2021–09–30 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedawp:93478&r= |
| By: | Popp, Martin (Institute for Employment Research (IAB), Nuremberg, Germany) |
| Abstract: | "Economists increasingly refer to monopsony power to reconcile the absence of negative employment effects of minimum wages with theory. However, systematic evidence for the monopsony argument is scarce. In this paper, I perform a comprehensive test of monopsony theory by using labor market concentration as a proxy for monopsony power. Labor market concentration turns out substantial in Germany. Absent wage floors, a 10 percent increase in labor market concentration makes firms reduce wages by 0.5 percent and employment by 1.6 percent, reflecting monopsonistic exploitation. In line with perfect competition, sectoral minimumwages lead to negative employment effects in slightly concentrated labor markets. This effect weakens with increasing concentration and, ultimately, becomespositive in highly concentrated or monopsonistic markets. Overall, the results lend empirical support to the monopsony argument, implying that conventional minimum wage effects on employment conceal heterogeneity across market forms." (Author's abstract, IAB-Doku) ((en)) |
| Date: | 2021–12–22 |
| URL: | http://d.repec.org/n?u=RePEc:iab:iabdpa:202121&r= |
| By: | Robert Clark (Queen's University); Christopher Anthony Fabiilli (Competition Bureau Canada); Laura Lasio (McGill University) |
| Abstract: | We study cartels that operated in the US generic drug industry, leveraging quarterly Medicaid data from 2011-2018 and a difference-in-differences approach comparing the evolution of prices of allegedly collusive drugs with a group of competitive control drugs. Our analysis highlights (i) the difficulty of establishing a suitable control group when collusion is pervasive, (ii) the importance of accounting for market structure changes when defining the control period, and (ii) the existence of across- and within-drug heterogeneity. We focus on six drug markets that that were part of the expanded initial complaint and where there was no entry in the same class during the collusive period, permitting a clean measure of the causal impact of collusion on prices. Our most conservative estimates suggest that collusion led to price increases of between 0% and 166% for each of the six drugs, and damages of between $0 and $3 million for the Medicaid market. |
| Keywords: | antitrust, generic drugs, price fixing |
| JEL: | L41 L12 L13 D22 D43 K21 I18 L65 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:qed:wpaper:1474&r= |
| By: | Robert Clark (Queen's University); Ig Horstmann (Rotman School of Management); Jean-Francois Houde (University of Wisconsin-Madison and NBER) |
| Abstract: | Numerous recently uncovered cartels operated along the supply chain, with firms at one end facilitating collusion at the other { hub-and-spoke arrangements. These cartels are hard to rationalize because they induce double marginalization and higher costs. We examine Canada's alleged bread cartel and provide the first comprehensive analysis of hub-and-spoke collusion. We make three contributions: i) Using court documents and pricing data we provide evidencethat collusion existed at both ends of the supply chain, ii) we show that collusion was effective, increasing inflation by about 40% and iii) we provide a model explaining why this form of collusion arose. |
| Keywords: | antitrust, vertical collusion, grocery industry |
| JEL: | L41 L44 L12 L13 D22 L66 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:qed:wpaper:1473&r= |
| By: | Espuny Pujol, Ferran; Hancock, Ruth; Hviid, Morten; Morciano, Marcello; Pudney, Stephen |
| Abstract: | We investigate the impact of exogenous local conditions which favor high market concentration on supply, price and quality in local markets for care homes for older people in England. We extend the existing literature in: (i) considering supply capacity as a market outcome alongside price and quality; (ii) taking account of the chain structure of care home supply and differences between the nursing home and residential care home sectors; (iii) using an econometric approach based on reduced form relationships that treats market concentration as a jointly determined outcome of a complex market. We find that areas susceptible to a high degree of market concentration tend to have greatly restricted supply of care home places and (to a lesser extent) a higher average public cost, than areas susceptible to low degree of market concentration. There is no significant evidence that conditions favoring high market concentration affect average care home quality. |
| Keywords: | care homes; market concentration; price; quality; supply; ES/L009153/1; ES/L011859/1; NIHR Applied Research Collaboration for Greater Manchester |
| JEL: | N0 L81 |
| Date: | 2021–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:112780&r= |
| By: | Robert Clark (Queen's University); Yiran Gong |
| Abstract: | The analysis of new product introduction using discrete-choice demand models has focused on successful products (e.g. the minivan) and their welfare impacts. Instead, we apply this approach to unsuccessful products to provide insight into the reasons for their failure. Our case study is the introduction and subsequent exit of Coca Cola's Vanilla Coke. Using IRI scanner data we estimate demand and supply and simulate counterfactual scenarios in which Vanilla Coke was not introduced. We then estimate Coca Cola's profit gains from the new brand and find they would not cover fixed costs. We analyze the importance of (i) overall demand for soft drinks, (ii) private label presence, (iii) rival promotion, and (iv) consumer preferences for explaining Vanilla Coke's failure, by investigating what the levels of each would have had to be for Vanilla Coke to at least cover its fixed costs. We then investigate the extent to which Coca Cola may have misjudged the levels for these variables by looking at their pre-introduction values. We find Coca Cola did anticipate part of rival reactions that made survival harder, but the actual changes were even beyond its anticipation and contributed to Vanilla Coke's exit. |
| Keywords: | New product introduction, Product Failure, Brand Value, Cannibalization, Soft drink industry |
| JEL: | L11 L13 L66 M31 M11 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:qed:wpaper:1475&r= |
| By: | Filip Abraham; Yannick Bormans; Jozef Konings; Werner Roeger |
| Date: | 2021–12–09 |
| URL: | http://d.repec.org/n?u=RePEc:ete:vivwps:685401&r= |
| By: | Heng Geng (Victoria University of Wellington); Harald Hau (University of Geneva - Geneva Finance Research Institute (GFRI); Swiss Finance Institute; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)); Roni Michaely (The University of Hong Kong; ECGI); Binh Nguyen (Victoria University of Wellington - Victoria University of Wellington, Students) |
| Abstract: | We investigate how board overlap affects coordination and performance among public firms. Our identification exploits the staggered introduction of Corporate OpportunityWaivers (COWs) in nine U.S. states since 2000. By reducing legal risk to directors serving on multiple boards, the COW legislation increased intra-industry board overlap for those firms that benefit most from the information flow facilitated by board overlap. We find that more board overlap improves firm profitability but also reduces investment, product overlap, and innovation. Our findings support the notion that board overlap curtails firm rivalry. |
| Keywords: | Board overlap, corporate opportunity waivers, firm coordination, market power |
| JEL: | G30 G38 K21 K22 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp2179&r= |
| By: | Yang Li (Instituto Complutense de Estudios Internacionales (ICEI), Universidad Complutense de Madrid.) |
| Abstract: | En este trabajo se analiza la motivación y estrategia de las empresas multinacionales chinas en su internacionalización vía fusiones y adquisiciones (F&A). Haciendo uso de los datos que proporciona la Oficina Nacional de Estadística de China y la Base de Datos Zephyr entre 2011 y 2017, se plantea un modelo econométrico de efectos fijos que permite estudiar el impacto de las operaciones de F&A en el desempeño innovador industrial de China. En cuanto a los principales resultados obtenidos, se evidencia que prevalece una búsqueda de activos estratégicos en la internacionalización de China a través de F&A, lo que le permite la adquisición de conocimiento en el exterior y contribuye positivamente al resultado tecnológico de la industria. Sin embargo, las empresas estatales no contribuyen al desempeño innovador de China en sus estrategias de internacionalización. Por último, es relevante mencionar, que el conocimiento adquirido en el extranjero a través de fusiones y adquisiciones se encuentra impulsado actualmente por las políticas industriales de China. |
| Abstract: | This paper analyzes the motivation and strategy of Chinese multinational companies in their internationalization via mergers and acquisitions (M&A). Using the data provided by the National Statistical Office of China and the Zephyr Database between 2011 and 2017, a fixed effects econometric model is proposed that allows studying the impact of M&A operations on China's industrial innovation performance. Regarding the main results obtained, it is evident that a search for strategic assets prevails in the internationalization of China through M&A, which allows the acquisition of knowledge abroad and contributes positively to the technological result of the industry. However, state-owned companies do not contribute to China's innovative performance in its internationalization strategies. Finally, it is relevant to mention that the knowledge acquired abroad through mergers and acquisitions is currently driven by China's industrial policies. |
| Keywords: | Empresas Multinacionales Emergentes; Fusiones y Adquisiciones Transfronterizas; Transferencia de Conocimiento Inverso; Innovación; Emerging Multinational Companies; Cross-Border Mergers and Acquisitions; Reverse Spillover; Innovation |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ucm:wpaper:2102&r= |
| By: | Ida Brzezinska |
| Abstract: | This paper uses firm-level data from the Chinese Annual Survey of Industrial Firms (CASIF) for the years 1998-2007 to analyse the impact of the household registration system (Hukou) reform in China on monopsony power of firms. I adopt a multiple-period difference-in¬differences framework to exploit the non-uniform labour market reform implementation. By comparing firms in cities that adopted the reform to firms in cities that did not, I find that relaxing restrictions on geographical labour mobility decreased firms’ monopsony power overall. Further heterogeneity analysis suggests that the effect can be decomposed into two offsetting forces: firms in big cities saw their monopsony power increase, while it diminished for firms in small cities. Consistent with a decrease in monopsony power, firms in reform cities spent 26% more on the worker housing fund and 7% more on unemployment insurance as a result of the Hukou reform. I find that the Hukou reform is positively related with both marginal and average products of labour. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:csa:wpaper:2021-12&r= |
| By: | Samuel Brien |
| Abstract: | This paper examines the effect of wealth concentration on firms’ market powerwhen firm entry is driven by entrepreneurs facing uninsurable idiosyncratic risks. Undergreater wealth concentration, households in the lower end of the wealth distribution aremore risk averse and less willing (or able) to bear the risk of entrepreneurial activities.This has implications for firm entry, competitiveness, and market power.I calibrate a Schumpeterian model of endogenous growth with heterogeneous riskaverse entrepreneurs competing to catch up with firms. This model is unique in thatboth household wealth distribution and a measure of firm markup are endogenouslydetermined on a balanced growth path. I find that a spread in the wealth distributiondecreases entrepreneurial firm creation, resulting in greater aggregate firm marketpower. This result is supported by time series evidence obtained from the estimationof a structural panel VAR with OECD data from eight countries. |
| Keywords: | Wealth inequality, market power, growth, Schumpeterian, endogenous growth, entrepreneur |
| JEL: | E22 E21 L12 O31 O33 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:qed:wpaper:1476&r= |