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Notes on the Merger Strategy of High versus Low-tech Industries: Complementarities and Moral Hazard

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  • Neslihan Aydogan

    (School of Public Policy and Environmental Affairs, Indiana University, Bloomington)

Abstract

In this essay I assess the role that is played by the two characteristics of high-tech firms in shaping their corporate strategies: short product cycles and the involvement of intangible assets in production. Short product cycles impose high-tech firms to seek complementary assets for entering new markets quickly and compete. The involvement of intangible capital in high-tech production, on the other hand, is related to the distinguishing characteristic of high-tech industries for which R&D activities are observed frequently and firms employ a large proportion of scientists, engineers and technicians. In this essay, I hypothesize and show that as a result of these two characteristics high-technology firms are likely to engage in vertical mergers more often than low-technology firms and vertical mergers are likely to involve firms that employ intangible assets in production.

Suggested Citation

  • Neslihan Aydogan, 2002. "Notes on the Merger Strategy of High versus Low-tech Industries: Complementarities and Moral Hazard," Economics Bulletin, AccessEcon, vol. 12(7), pages 1-12.
    • Handle: RePEc:ebl:ecbull:eb-02l10005
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    complementarities;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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