DOWNSTREAM MERGERS AND UPSTREAM INVESTMENT

Ramón Faulí-Oller (), Joel Sandonis and Juana Santamaria-Garcia ()
Additional contact information
Ramón Faulí-Oller: Universidad de Alicante
Juana Santamaria-Garcia: Universidad de Alicante

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: In this paper, we show that downstream mergers increase the incentives of an up-stream firm to invest in cost-reducing R&D. The upstream firm revenues increase with industry profits, which in turn increase with concentration downstream and this explains the positive link between concentration and investment. This effect is so important that it outweights the negative effect on prices due to lower competition. Therefore, in our context, horizontal mergers are pro-competitive.

Keywords: downstream mergers; upstream innovation; competition (search for similar items in EconPapers)
Pages: 18 pages
Date: 2007-04
New Economics Papers: this item is included in nep-bec, nep-com, nep-cse, nep-ind and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published by Ivie

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http://www.ivie.es/downloads/docs/wpasad/wpasad-2007-11.pdf Fisrt version / Primera version, 2007 (application/pdf)

Related works:
Journal Article: DOWNSTREAM MERGERS AND UPSTREAM INVESTMENT (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:2007-11

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