Killer Acquisitions

Colleen Cunningham, Florian Ederer and Song Ma

Journal of Political Economy, 2021, vol. 129, issue 3, 649 - 702

Abstract: This paper argues that incumbent firms may acquire innovative targets solely to discontinue the target’s innovation projects and preempt future competition. We call such acquisitions “killer acquisitions.” We develop a model illustrating this phenomenon. Using pharmaceutical industry data, we show that acquired drug projects are less likely to be developed when they overlap with the acquirer’s existing product portfolio, especially when the acquirer’s market power is large because of weak competition or distant patent expiration. Conservative estimates indicate that 5.3%–7.4% of acquisitions in our sample are killer acquisitions. These acquisitions disproportionately occur just below thresholds for antitrust scrutiny.

Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (34)

Downloads: (external link)
http://dx.doi.org/10.1086/712506 (application/pdf)
http://dx.doi.org/10.1086/712506 (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jpolec:doi:10.1086/712506

Access Statistics for this article

More articles in Journal of Political Economy from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().