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Duplicative research, mergers and innovation

Vincenzo Denicolò and Michele Polo ()

Economics Letters, 2018, vol. 166, issue C, 56-59

Abstract: We show that in the model of Federico et al. (2017) horizontal mergers may actually spur innovation by preventing duplication of R&D efforts. Federico et al. do not notice this result because they presume that the merged firm spreads its R&D expenditure evenly across the research units of the merging firms—a strategy which is optimal, however, only if the probability of failure is log-convex in the RD effort. The possibility that mergers spur innovation is more likely, the greater is the value of innovations and the less rapidly diminishing are the returns to R&D.

Keywords: Horizontal mergers; Innovation; R&D investment (search for similar items in EconPapers)
JEL-codes: L00 (search for similar items in EconPapers)
Date: 2018
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