Common Institutional Ownership and Product Market Threats

76 Pages Posted: 16 Dec 2018 Last revised: 9 Feb 2021

See all articles by Omesh Kini

Omesh Kini

Georgia State University

Sangho Lee

California State Polytechnic University, Pomona

Mo Shen

Auburn University

Date Written: February 7, 2021

Abstract

Overlapping institutional ownership in the same industry can have anti-competitive effects but can also elevate product market competition by promoting knowledge spillovers. Using a text-based product market threat variable, we find that, on average, firms with higher common ownership face greater competitive threats. This result, however, critically depends on industry characteristics such as the level of concentration, technology similarity, entry costs, and consumer switching costs. Evidence from firms’ new product development and investments further corroborates these findings. Our results suggest that implementing additional regulatory requirements on common ownership can potentially be welfare-destroying in industries with strong spillover opportunities.

Keywords: Common Institutional Ownership, Product Market Fluidity, Industry Concentration, Technology Proximity, Entry Costs, Total Product Similarity, Investments

JEL Classification: L10, G34, L11, L41

Suggested Citation

Kini, Omesh and Lee, Sangho and Shen, Mo, Common Institutional Ownership and Product Market Threats (February 7, 2021). Available at SSRN: https://ssrn.com/abstract=3301998 or http://dx.doi.org/10.2139/ssrn.3301998

Omesh Kini

Georgia State University ( email )

University Plaza
Atlanta, GA 30303-3083
United States
404-651-2656 (Phone)

Sangho Lee (Contact Author)

California State Polytechnic University, Pomona ( email )

3801 West Temple Avenue
College of Business Administration
Pomona, CA 91768
United States

Mo Shen

Auburn University ( email )

Auburn, AL 36849
United States

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