Is Business Broken?
What Happens When the Same Investors Own Competing Companies?
Mar 27, 2025
Florian Ederer, an expert in antitrust and competition at BU Questrom, dives into the contentious issue of common ownership—where the same big investors hold stakes in competing companies. He explains how this phenomenon impacts competition and innovation, questioning whether these firms maintain their competitive edge or simply boost costs for consumers. Ederer also highlights the implications for income inequality, revealing the disproportionate benefits for wealthier investors. Regulation challenges and the future of market dynamics take center stage in this enlightening conversation.
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Quick takeaways
- Common ownership by large investors in competing firms can reduce competition, leading to higher consumer prices in various industries.
- The phenomenon of common ownership may weaken innovation incentives among CEOs, ultimately harming both consumers and workers in the market.
Deep dives
Understanding Common Ownership
Common ownership occurs when large institutional investors hold minority stakes in multiple competing companies within the same industry, which can significantly impact competition. This concept is not new but has grown in prevalence since the 1980s, driven by the rise of diversified investment strategies encouraged by business schools. The phenomenon has reached a point where over 80% of publicly listed companies in the U.S. have major common owners like BlackRock, Vanguard, or State Street. As a result, this ownership structure can dilute the competitive drive among companies, potentially leading to less innovation and higher prices for consumers.
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