A Combined Cascade Model to Explain Industrial Consolidation: Theory and an Application to Steel

Abstract

Expansion through mergers and acquisitions (M&As) continues to be a viable international strategy utilised by industrial firms. A striking feature of this is that global giant firms lead the M&A wave and generate an unimaginable impact on relatively small and weak firms across sectors and even nations. There seems to be a kind of ‘cascade effect’ between the industrial consolidations in these areas. A combined cascade model developed in this paper explains that, the power imbalance caused by the degree of consolidation of the players within a firm's value system determines the movement and direction of the ‘cascade effect’. With the existence of such effect, M&A will be a mutually interdependent, dynamic, reversible and endless process among industries.

Citation

Rui, H. (2006), "A Combined Cascade Model to Explain Industrial Consolidation: Theory and an Application to Steel", Choi, J.J. and Click, R.W. (Ed.) Value Creation in Multinational Enterprise (International Finance Review, Vol. 7), Emerald Group Publishing Limited, Leeds, pp. 255-281. https://doi.org/10.1016/S1569-3767(06)07011-7