How does competition structure affect industry merger waves? A network analysis perspective

• A new industry merger wave model is presented from a network analysis perspective.
• We explain why and how merger waves happen driven by competition diffusion.
• Competitive structure among rivals has a strong effect on industry merger wave.
• The effect is different between single and multi-market competition environment.
• Firms involved in merger waves can learn and find useful competition strategies.

By taking China’s beer industry as an example, this paper establishes a series of industrial competition–pressure networks and examines the correlation between competition structure and merger actions. We present a cascade dynamic-merger agent-based computational model driven by competition pressure diffusion to describe the forming process of industry merger wave. The empirical analyses and agent-based computational simulation results show that the competition structure among rivals has a strong effect on the scale, the duration time, and the stability of industry merger wave. We also give explanations on why there are different simulation results between in single market competition environment and in multi-market competition environment, as well as discuss the management implications for the industry-merger policy makers and the merger-tactics decision makers that are involved in merger wave.