Vertical Integration and Firewalls with R&D Spillovers
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In high tech industries, a competitive concern about a vertical integration is that merged entity transfers proprietary information of a competitor's innovation to its downstream or upstream division. In several recent vertical integration cases, FTC/DOJ requires Firewalls to prevent the passage of competitively-sensitive information within an merged entity. This paper studies the welfare consequences of such a integration and related information transfers in markets with vertical R&D spillovers. The main result is that a Firewalls provision does not necessarily improve social welfare. The reason is that Firewalls may affect a nonintegrated firm’s decision for an input supplier.
Abstract
In high tech industries, a competitive concern about a vertical integration is that merged entity transfers proprietary information of a competitor's innovation to its downstream or upstream division. In several recent vertical integration cases, FTC/DOJ requires Firewalls to prevent the passage of competitively-sensitive information within an merged entity. This paper studies the welfare consequences of such a integration and related information transfers in markets with vertical R&D spillovers. The main result is that a Firewalls provision does not necessarily improve social welfare. The reason is that Firewalls may affect a nonintegrated firm’s decision for an input supplier.
참고문헌 (13)
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