Abstract:
This study examines the determinants of Merger and Acquisition (M & A)
when manufacturing firms integrate with retailing firms. We examine a manufacturing
duopoly in which each upstream firm sells the output to its exclusive
retailing firm. In sequence of the timing of game, the strategic variables
are set as Research and Development (R & D) investment, wholesale price by
manufacturing firms and sales volume by retailing firms. The study concludes
that degree of investment efficiency, product differentiation, and market size
play important roles in vertical integration. Our conclusion shows that if
product differentiation becomes greater, the vertical integration increases.
Secondly, if the market size becomes larger, the vertical integration increases.
Thirdly, the vertical integration increases when investment efficiency becomes
higher. Our theoretical findings are also supported by the empirical results
with the listed Japanese company data from 1996 to 2016.
