Mergers and Telecommunications Infrastructure Deployment: A Retrospective Analysis

S.K. Majumdar, R. Moussawi and U. Yaylacicegi

Competition and Regulation in Network Industries, 2014, vol. 15, issue 4, 382-424

Abstract: We retrospectively evaluate the impact of the various mergers of the local exchange companies in the United States telecommunications industry between 1988 and 2001 on technology investment levels. We use treatment effects modelling to evaluate major mergers in a sector where technology diffusion is important, and the approach accounts for selection bias and the endogenous nature of mergers. Our framework is based on behavioural theories of the firms and we use co-evolutionary and dynamic capabilities approaches in framing our analyses and explaining our results. We find that across firms and time, the merger events are positively and significantly associated with investments in fibre and digital assets. We stratify the data by size of firm to undertake detailed data analysis because of the presence of firm-specific heterogeneities and find that for the smaller merging firms there is a negative and significant association of mergers with investments in fibre and digital assets while for the larger merging firms this mergers and fibre and digital assets investments association is positive and significant. Our results support the predictions of the behavioural theories of the firm, and particularly the dynamic capabilities perspective. We draw implications for theory and competition policy of our results.

Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:sen:journl:v:15:i:4:y:2014:p:382-424

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