A Simple Model of Mergers and Innovation

We analyze the impact of a merger on firms’ incentives to innovate. We show that the merging parties always decrease their innovation efforts post-merger while the outsiders to the merger respond by increasing their effort. A merger tends to reduce overall innovation. Consumers are always worse off after a merger. Our model calls into question the applicability of the “inverted-U” relationship between innovation and competition to a merger setting.

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Year of publication:	2017
Authors:	Federico, Giulio ; Langus, Gregor ; Valletti, Tommaso M.
Publisher:	Munich : Center for Economic Studies and ifo Institute (CESifo)
Subject:	innovation \| R&D \| mergers

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Series:	CESifo Working Paper ; 6539
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	892771828 [GVK] hdl:10419/167525 [Handle] RePec:ces:ceswps:_6539 [RePEc]
Classification:	D43 - Oligopoly and Other Forms of Market Imperfection ; G34 - Mergers; Acquisitions; Restructuring; Corporate Governance ; L40 - Antitrust Policy. General ; O30 - Technological Change; Research and Development. General
Source:	EconStor

Persistent link: https://www.econbiz.de/10011698706