Overlapping Ownership, R&D Spillovers, and Antitrust Policy

Overlapping Ownership, R&D Spillovers, and Antitrust Policy

Ángel L. López, Xavier Vives

Series number :

Serial Number: 

Date posted :

November 21 2017

Last revised :

November 21 2017
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  • competition policy • 
  • partial merger • 
  • collusion • 
  • innovation • 
  • minority shareholdings • 
  • Common ownership • 
  • cross-ownership

This paper considers cost-reducing R&D investment with spillovers in a Cournot
oligopoly with overlapping ownership. We show that overlapping ownership leads
to internalization of rivals’ profits by firms and find that, for demand not too convex, increases in overlapping ownership increase (decrease) R&D and output

for high (low) enough spillovers while it increases R&D but decreases output for
intermediate levels of spillovers. There is scope for overlapping ownership to
improve welfare provided that spillovers are sufficiently large. The socially optimal
degree of overlapping ownership increases with the number of firms, with the
elasticity of demand and of the innovation function, and with the extent of spillover
effects. In terms of consumer surplus standard, the desirability of overlapping
ownership is greatly reduced even under low market concentration. When R&D
has commitment value and spillovers are high the optimal extent of overlapping
ownership is higher. The results obtained are robust in the context of a Bertrand
oligopoly model with product differentiation.


Real name:
Ángel L. López