English, Article, Journal or magazine article edition: A Model of Conglomeration and Synergy Traps M. Àngels Oliva; Luis Rivera-Bátiz

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Bookmark: http://trove.nla.gov.au/version/112103
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • A Model of Conglomeration and Synergy Traps
Author
  • M. Àngels Oliva
  • Luis Rivera-Bátiz
Physical Description
  • preprint
Notes
  • We present a model of conglomeration motivated by technology synergies and strategic reductions in variable costs in the face of competitive pressures. The resulting firm integration is neither horizontal nor vertical but rather congeneric integration of firms in related industries. We endogenize the industrial conglomeration structure and examine the effects of competition between conglomerates, and between a conglomerate and independent firms. We show that there is an equilibrium synergy trap in which conglomerates are formed to exploit economies of scope, but resulting profits are lower than under the status quo. We also show that strategic firm integration can occur even in the presence of diseconomies of scope. The model helps to explain features of recent mergers and acquisitions experience.
  • Conglomerate, integration, synergy, strategy
  • RePEc:upf:upfgen:232
Language
  • English
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