The effects of conglomerate mergers on concentration in manufacturing industries, 1967-1977

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Heimforth, Keith
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The Department of Economic Science was founded in 1898 to teach economic theory as a truth of industrial life, and was very much concerned with applying economics to business and industry, particularly agriculture. Between 1910 and 1967 it showed the growing influence of other social studies, such as sociology, history, and political science. Today it encompasses the majors of Agricultural Business (preparing for agricultural finance and management), Business Economics, and Economics (for advanced studies in business or economics or for careers in financing, management, insurance, etc).

The Department of Economic Science was founded in 1898 under the Division of Industrial Science (later College of Liberal Arts and Sciences); it became co-directed by the Division of Agriculture in 1919. In 1910 it became the Department of Economics and Political Science. In 1913 it became the Department of Applied Economics and Social Science; in 1924 it became the Department of Economics, History, and Sociology; in 1931 it became the Department of Economics and Sociology. In 1967 it became the Department of Economics, and in 2007 it became co-directed by the Colleges of Agriculture and Life Sciences, Liberal Arts and Sciences, and Business.

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  • Department of Economic Science (1898–1910)
  • Department of Economics and Political Science (1910-1913)
  • Department of Applied Economics and Social Science (1913–1924)
  • Department of Economics, History and Sociology (1924–1931)
  • Department of Economics and Sociology (1931–1967)

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This dissertation investigates the relationship between conglomerate mergers and changes in concentration in 193 manufacturing industries. The theoretical bases suggesting the possibility of such a relationship are explained, as are the theoretical implications of any such relationship. An ordinary least squares multiple regression model is presented for use in analyzing changes in four-firm and eight-firm concentration ratios (CR-4 and CR-8, respectively) in an attempt to infer the extent to which the practices of reciprocity, cross-subsidization, and/or mutual forbearance are used to affect the market shares of firms acquired in conglomerate mergers;Descriptive statistics for changes in CR-4 and CR-8 in the sample industries during the period 1967-77 are presented. These statistics show, inter alia, that: (1) concentration in consumer-goods industries has increased and concentration in producer-goods industries has decreased, and (2) the number of conglomerate mergers seems to be inversely related to changes in concentration. The latter result is referred to as the "dampening relation" between conglomerate mergers and changes in industry concentration;The results from estimation of the regression model are generally consistent with results from previous studies. They provide no support for theories predicting that conglomerate mergers result in increases in industry concentration, and they provide only very weak evidence that such mergers lead to decreases in concentration. Thus, the wide-spread use of reciprocity or cross-subsidization to increase the market shares of acquired firms cannot be inferred from this study. However, various further regression analyses support the existence of the dampening relation suggested by the descriptive Statistics and Probability; This result is consistent with the theory of mutual forbearance between large diversified firms.

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Sat Jan 01 00:00:00 UTC 1983