Integration contracts and asset complementarity: theory and evidence from US data

Firms sign integration contracts to increase pro…ts from trade and competition with third parties. An integration contract can improve complementarity among partners (productivity effect) and increase their power in the marketplace (strategic effect). We investigate three bilateral contracts: M&A, Minority Stake purchase, and Joint Venture. By using a cooperative game approach, we characterize quite general pro…tability conditions. To estimate them, we adopt a novel complementarity index. It shows that for any kind of contract, a significant share of the integration profits is due to the “strategic” effect of increased market power. Productivity gains are relatively less important, and in some cases they are negative.