Three Essays on Competition and Cooperation in R and D Alliances

In this dissertation, I investigate the interplay between competition and cooperation in R&D alliances. The alliance literature on this issue has emphasized that product market rivalry (i.e., market overlap) between partnering firms aggravates cooperation hazards by increasing the private benefits from opportunism. However, drawing on the multimarket competition literature, I maintain that market overlap between alliance partners can rather curb opportunism by partners because the multimarket contact between them might increase the expected costs of opportunistic behaviors by enabling broad retaliation against such behaviors across the shared markets. Based on this argument, I theorize and corroborate that the mutual forbearance from opportunism that multimarket contact generates not only promotes the formation of R&D collaborations in Essay 1, but also substitutes for hierarchical governance structures in R&D alliances in Essay 2. In Essay 3, I also extend the prior literature on competitive aspects of R&D collaborations that has been mainly interested in knowledge protection concerns in alliances between direct rivals. I join the alliance literature with the agglomeration literature to argue and show that geographic co-location between an allying firm’s partner and the major rivals of the allying firm introduces potential indirect paths of knowledge leakage to rivals, making the allying firm more likely to employ defense mechanisms such as using equity structures and reducing task interdependence

Should merger policy be changed? An antitrust perspective

Consolidation and merger of corporations ; Antitrust law

Sherman vs. Goliath?: Tackling the Conglomerate Dominance Problem in Emerging and Small Economies—Hong Kong as a Case Study

This article explores a competition problem that has been long neglected in the two major competition law jurisdictions, the United States and the European Union, conglomerate dominance or aggregate concentration. With their continental scale, the U.S. or the EU economies are unlikely to be dominated by conglomerates. However, conglomerates have been found to be common in small economies and emerging economies. Conglomerates no doubt have their advantages. Yet they also pose some serious economic power issues and distort competition in a variety of ways, the latter of which has been relatively unexplored in the literature. This article catalogs these issues and distortions and proposes two sets of responses to them: direct regulation of conglomerates and competition law enforcement. These two sets of solutions to some extent alleviate the detrimental effects of conglomerates. However, they do not get to the root of the problem, domination of an economy by large conglomerates. Using Hong Kong as an example, this article illustrates the application of these two sets of solutions and their limitations

Dynamics of multinational rivalry

Drawing insights from strategic management and international business literature, the present study develops an integrated model to explain the competitive actions between multinational firms in a global context. Accordingly, two research questions are addressed: What key factors explain the competitive actions of multinational firms? What key factors moderate the competitive tensions experienced by different pairs of multinational firms? Using structured content analysis to identify competitive actions, the empirical findings of the present study suggest that subsidiary control, MNE size, national culture, government regulations and multimarket contact are all likely to exert important impact on a multinational firm's motivation and capability to compete and therefore influence its competitive aggressiveness in foreign markets

Listings from the Emerging Economies: An Opportunity for Reputable Stock Exchanges

We provide current evidence to show that the numbers of sponsored depositary receipts created and cross‐listed have increased by more than two‐fold over the last decade and a substantial proportion of this growth came from the emerging and developing economies. We argue that the needs of this clientele and the inadequacies of existing legal and financial system create an opportunity for reputable stock exchanges to play the role of an information and reputation intermediary and in so doing allow exchanges to leverage on their reputation capital to compete more effectively for the growing business from the emerging and developing economies. We contribute further by developing a parsimonious model to analyze the interaction between an exchange playing the new role and firms seeking to list their equity on the exchange. We show that a subgame perfect equilibrium is obtained and provide an explanation for the spike in delisting in the latter half of 2007. Our model fills an important gap by addressing some shortcomings in existing theoretical models

Family Control and the Rent-Seeking Society

The small number of very large family-controlled corporate groups in many countries combined with their long continuity of control and ability to act discretely give these organizations a comparative advantage in political rent-seeking. This advantage is a key part of a self-reinforcing system whereby oligarchic family corporate control, political rent seeking, and low general levels of trust combine to stymie growth.http://deepblue.lib.umich.edu/bitstream/2027.42/39971/3/wp585.pd

Market size, markups and international price dispersion in the cement industry

Prices for several intermediate inputs, including cement, are higher in developing economies - particularly in Africa. Combining data from the International Comparison Program with a global directory of cement plants we estimate an industry equilibrium model to distinguish between drivers of international price dispersion: demand, costs, conduct, and entry. Developing economies feature both higher marginal costs and higher markups. African markets are not characterized by higher barriers to entry and, if anything, feature relatively more competitive conduct. The small size of many national markets, however, limits entry and competition and explains most of the higher markups. Policy implications are discussed

Family Control and the Rent-Seeking Society

The small number of very large family-controlled corporate groups in many countries combined with their long continuity of control and ability to act discretely give these organizations a comparative advantage in political rent-seeking. This advantage is a key part of a self-reinforcing system whereby oligarchic family corporate control, political rent seeking, and low general levels of trust combine to stymie growth.

Opportunistic Discrimination

When can you cheat some people without damaging your reputation among others? In a trust game between a firm and a series of individuals from two groups of different sizes, the firm has more incentive to cheat minority individuals because trade with the minority is less frequent and the long-term benefits of a reputation for fairness toward the minority are correspondingly smaller. If the majority is sufficiently large it gains nothing from a solidarity strategy of punishing opportunism against the minority, so the firm can continue doing business with the majority even if it cheats the minority. When some firms have a preference-based bias against the minority, the interaction with reputation effects gives all firms a stronger incentive to cheat the minority, and discrimination is the unique equilibrium for firms of intermediate patience.discrimination, trust, social capital, opportunism, reputation spillover

The Impact of Competition on Bank Orientation and Specialization

How do banks react to increased interbank competition?Recent banking theory offers conflicting predictions about the impact of competition on bank orientation í L H WKH choice of relationship based versus transactional banking í DQG EDQN LQGXVWU\ specialization.We empirically investigate the impact of interbank competition on bank branch orientation and specialization.We employ a unique data set containing detailed information on bank-firm relationships and industry classification.We find that bank branches facing stiff local competition engage relatively more in relationship-based lending but specialize somewhat less in a particular industry.Our results illustrate that competition and relationships are not necessarily inimical.competition;banks;bank lending