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

Neslihan Aydogan

Economics Bulletin, 2002, vol. 12, issue 7, 1-12

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.

Keywords: complementarities (search for similar items in EconPapers)
JEL-codes: L1 L2 (search for similar items in EconPapers)
Date: 2002-05-28
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