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. (C) 2017 Elsevier B.V. All rights reserved.
Federico, G., Langus, G., Valletti, T. (2017). A simple model of mergers and innovation. ECONOMICS LETTERS, 157, 136-140 [10.1016/j.econlet.2017.06.014].
A simple model of mergers and innovation
Federico G.;Valletti T.
2017-01-01
Abstract
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. (C) 2017 Elsevier B.V. All rights reserved.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
