NO 340 - Rising Markups, Common Ownership, and Technological Capacities

In the data, the product of output prices and quantities PjtQjt is given as sales, and the product of the price and quantities of materials wmjtmjt is given as material expenditures. [...] Subscripts j and k denote firms and competitors, i indexes the investors, and βij are ownership shares.6 Summing over all combinations of firms and competitors in the industry, the individual profit weights in the fraction are weighted with the product of market shares sj and sk of the firm and respective rival. [...] The following firm-level variables are used in the matching procedure to estimate the propensity score: the logarithm of markups, the logarithm of TFP, firm age, number of patent citations, labour, capital, and output in logarithms, and the share of institutional holdings. [...] In the sample splits, we see that the effect on markups is increasing with the levels of spillovers and reaches up to 3.4% for observations above the 75th percentile of the spillover distribution. [...] The observed increase of the effects of common ownership on markups and innovation with the degree of spillovers, and also the positive effect on markups and non-negative effects on innovation in low-spillover regions, are consistent with theoretical predictions in Lopéz and Vives (2019).