Knowledge Transfer and Partial Equity Ownership
University of New South Wales - Australian School of Business - School of Economics
University of New South Wales - School of Economics
February 1, 2012
UNSW Australian School of Business Research Paper No. 2012ECON18
When firms form an alliance, it often involves one firm acquiring an equity stake in its alliance partner. Such an alliance weakens competition, but induces knowledge transfer between partner firms. We explore oligopoly models that capture the link between knowledge transfer and partial equity ownership (PEO), where alliance partners can choose the level of PEO to connect themselves. PEO, merger and independence are all nested in our model, where PEO can arise in equilibrium and the endogenously determined level of PEO can benefit consumers and/or society. We identify conditions under which antitrust authorities would prohibit, partially permit, or permit PEO.
Number of Pages in PDF File: 49
Keywords: knowledge transfer, oligopoly, partial equity ownership, strategic alliances, welfare
JEL Classification: L10, L40, L50working papers series
Date posted: March 19, 2012
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