In explaining the reasons for the large number of mergers among multinational companies as well as small specialized businesses in recent years, the realization of potential synergies among the merging firms has often been pointed out. Synergy is a ‘Holy Grail’ of business strategy; many seek it but few actually succeed and most attempts at developing synergies meet at a non desirable fate. A global survey of A.T. Kearney (1998) concluded that after three years of a transaction the profitability of the integrated firm decreases by 10 % on average and 50 % of alliances in the USA fail within four years.
Nevertheless, it is particularly claimed that a vertical integration will enable the supplier to adapt his technology in a much higher degree to the needs of his customer than when he is separately owned . A world-wide study of Arthur Andersen elaborated on the factors which firms look upon when striving for merging with another company.
Inhaltsverzeichnis (Table of Contents)
- I. Introduction
- II. The basic model
- III. Equilibrium analysis
- IV. 'Firewall' versus information flow
- V. Welfare analysis
- VI. Conclusion
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This paper explores the impact of vertical integration on R&D information flow and its potential consequences for competition and innovation. It examines the argument that "firewalls" may be necessary to prevent anticompetitive behavior and reduce innovation incentives. The author investigates the theoretical underpinnings of this argument, analyzing the impact of ownership structures on the realization of synergies and exploring the potential for information flow to either enhance or stifle innovation.
- The role of information flow in vertical integration
- The potential for "firewalls" to restrict information flow
- The impact of vertical integration on innovation incentives
- The relationship between competition and innovation
- The economic theory of property rights and its application to vertical integration
Zusammenfassung der Kapitel (Chapter Summaries)
- I. Introduction: This chapter introduces the topic of vertical integration and its relationship to R&D information flow. It highlights the common practice of mergers and acquisitions in recent years, as well as the challenges associated with realizing synergies. The chapter discusses the potential benefits of vertical integration, particularly regarding technology adaptation, but also acknowledges the concerns raised by antitrust authorities regarding information flow and competition.
- II. The basic model: This chapter presents a simple model to analyze the impact of vertical integration on R&D information flow. The model incorporates key assumptions about the behavior of firms and the nature of the information flow.
- III. Equilibrium analysis: This chapter utilizes the model to examine the equilibrium outcomes of vertical integration, considering different scenarios and assumptions regarding information flow.
- IV. 'Firewall' versus information flow: This chapter explores the trade-offs between implementing "firewalls" to restrict information flow and allowing for information flow between vertically integrated firms. It examines the arguments for and against each approach and discusses their potential impact on innovation and competition.
- V. Welfare analysis: This chapter assesses the overall welfare implications of vertical integration and information flow. It considers the potential benefits and costs of different scenarios and evaluates the relative impact on consumer welfare, innovation, and economic efficiency.
Schlüsselwörter (Keywords)
Vertical integration, R&D information flow, "firewalls", antitrust, competition, innovation, synergies, property rights, equilibrium analysis, welfare analysis, mergers and acquisitions, industry sectors, technology transfer, innovation incentives.
- Quote paper
- Stefan Georg Hunger (Author), 2004, Vertical Integration and R&D Information Flow, Munich, GRIN Verlag, https://www.grin.com/document/44826
