Product market competition in a world of cross-ownership: Evidence from institutional blockholdings

We analyze the effects of institutional cross-ownership of same-industry firms on product market performance and behavior. Our results show that cross-held firms experience significantly higher market share growth than do non-cross-held firms. We establish causality by relying on a difference-in-differences approach based on the quasi-natural experiment of financial institution mergers. We also find evidence suggesting that institutional cross-ownership facilitates explicit formsofproduct market collaboration (such as within-industry joint ventures, strategic alliances, or within-industry acquisitions) and improvesinnovation productivityand operating profitability. Overall, our evidenceindicates that cross-ownership by institutional blockholders offers strategic benefits by fostering product market coordination.