Mergers and Demand-Enhancing Innovation

Bruno Jullien, Marc Bourreau and Yassine Lefouili

No 16031, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study the impact of horizontal mergers on merging firms’ incentives to invest in demand-enhancing innovation. In our baseline model, we identify four effects of a symmetric merger on these incentives: the innovation diversion effect, the margin expansion effect, the demand expansion effect, and the per unit return to innovation effect. We offer sufficient conditions for a merger to reduce or raise merging firms’ incentives to innovate in the absence of spillovers and efficiency gains in R&D, and find that a comparison between the innovation diversion and price diversion ratios is informative about the impact of a merger on innovation.

Keywords: Horizontal mergers; Innovation; Competition (search for similar items in EconPapers)
JEL-codes: D43 L13 L40 (search for similar items in EconPapers)
Date: 2021-04
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Citations: View citations in EconPapers (5)

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Working Paper: Mergers and demand-enhancing innovation (2024)
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