Mergers and Innovation Portfolios

Moraga-González, José-Luis, Evgenia Motchenkova and Saish Nevrekar
Authors registered in the RePEc Author Service: Jose Luis Moraga-Gonzalez

No 14188, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper studies mergers in markets where firms invest in a portfolio of research projects of different profitability and social value. The investment of a firm in one project imposes both a negative business-stealing and a positive business-giving externality on the rival firms. We show that when the project that is relatively more profitable for the firms appropriates a larger (smaller) fraction of the social surplus, a merger increases (decreases) consumer welfare by reducing investment in the most profitable project and increasing investment in the alternative project. The innovation portfolio effects of mergers may dominate the usual market power effects.

Keywords: Horizontal mergers; Innovation portfolios; R&d contests (search for similar items in EconPapers)
JEL-codes: L13 L22 O31 O32 (search for similar items in EconPapers)
Date: 2019-12
New Economics Papers: this item is included in nep-com, nep-mic, nep-ppm and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Mergers and innovation portfolios (2022)
Working Paper: Mergers and Innovation Portfolios (2019)
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