TY - JOUR
T1 - Horizontal Partial Cross Ownership and Innovation*
AU - Shelegia, Sandro
AU - Spiegel, Yossi
N1 - Publisher Copyright:
© 2024 The Authors. The Journal of Industrial Economics published by The Editorial Board of The Journal of Industrial Economics and John Wiley & Sons Ltd.
PY - 2024
Y1 - 2024
N2 - 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.
AB - 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.
UR - http://www.scopus.com/inward/record.url?scp=85193001565&partnerID=8YFLogxK
U2 - 10.1111/joie.12392
DO - 10.1111/joie.12392
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AN - SCOPUS:85193001565
SN - 0022-1821
JO - Journal of Industrial Economics
JF - Journal of Industrial Economics
ER -