Duplicative research, mergers and innovation
Denicolï¿½, Vincenzo and
Michele Polo ()
No 12511, CEPR Discussion Papers from C.E.P.R. Discussion Papers
We show that in the model of Federico, Langus and Valletti (2017) [A simple model of mergers and innovation, Economics Letters, 157, 136-140] horizontal mergers may actually spur innovation by preventing duplication of R&D efforts. This possibility is more likely, the greater is the value of innovations, the less rapidly diminishing are the returns to R&D, and the more highly correlated are the R&D projects of different firms. Federico, Langus and Valletti (2017) do not obtain this result because they focus only on the case in which the merged firm spreads total R&D expenditure evenly across the individual research units of the merging firms -- a strategy which is optimal, however, only if the returns to R&D diminish sufficiently rapidly.
Keywords: Horizontal mergers; Innovation (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-cse, nep-ino, nep-mic and nep-sbm
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Journal Article: Duplicative research, mergers and innovation (2018)
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