Rune Stenbacka, Hanken School of Economics
"Overlapping Ownership and Product Innovation"
Abstract
We characterize the effect of overlapping ownership (OO) on investments in product innovation. We analyze two opposing forces: (1) OO induces firms to internalize that success on their own behalf erodes the rivals’ business, reducing investments; (2) OO softens competition in the product market, enhancing investments. These forces also determine potential shifts between the stable symmetric investment equilibrium and asymmetric equilibria. Our analysis reveals that the competition-softening effect can induce OO to raise total welfare. We thus present a mechanism different from spillovers as a source for OO to yield welfare benefits.
Joint with with Geert Van Moer
Read full paper: Overlapping Ownership and Product Innovation
Contact person: Johan Lagerlöf