A simple model of mergers and innovation

Giulio Federico, Gregor Langus and Tommaso Valletti

Economics Letters, 2017, vol. 157, issue C, 136-140

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.

Keywords: Innovation; R&D; Mergers (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (67)

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Working Paper: A Simple Model of Mergers and Innovation (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:157:y:2017:i:c:p:136-140

DOI: 10.1016/j.econlet.2017.06.014

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