Vertical Integration and Foreclosure: Evidence from Production Network Data

Johannes Boehm and Jan Sonntag ()
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Jan Sonntag: ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper studies the prevalence of vertical market foreclosure using a novel dataset on U.S. and international buyer-seller relationships, and across a large range of industries. We find that relationships are more likely to break when suppliers vertically integrate with one of the buyers' competitors than when they vertically integrate with an unrelated firm. This relationship holds also, among other things, when conditioning on mergers that follow exogenous downward pressure on the supplier's stock prices, suggesting that reverse causality is unlikely to explain the result. In contrast, the relationship vanishes when using rumored or announced but not completed integration events. Firms experience a substantial drop in sales when one of their suppliers integrates with one of their competitors. This sales drop is mitigated if the firm has alternative suppliers in place.

Keywords: Mergers and acquisitions; Market foreclosure; Vertical integration; Production networks (search for similar items in EconPapers)
Date: 2018-12-01
Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03393115
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Related works:
Journal Article: Vertical Integration and Foreclosure: Evidence from Production Network Data (2023)
Working Paper: Vertical Integration and Foreclosure: Evidence from Production Network Data (2023)
Working Paper: Vertical Integration and Foreclosure: Evidence from Production Network Data (2023)
Working Paper: Vertical Integration and Foreclosure: Evidence from Production Network Data (2020)
Working Paper: Vertical integration and foreclosure: evidence from production network data (2019)
Working Paper: Vertical integration and foreclosure: evidence from production network data (2019)
Working Paper: Vertical Integration and Foreclosure: Evidence from Production Network Data (2018)
Working Paper: Vertical Integration and Foreclosure: Evidence from Production Network Data (2018)
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