Horizontal Mergers and Incremental Innovation

Marc Bourreau, Bruno Jullien () and Yassine Lefouili
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Bruno Jullien: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: We study the impact of horizontal mergers on the incentives of merging …rms to invest in incremental innovation. We provide a decomposition of this impact that clari…es the various forces at work and the di¤erences between demand-enhancing and cost-reducing innovation. Moreover, we derive su¢ cient conditions for a merger to either reduce or raise the merging …rms'incentives to innovate, and show that the comparison of the price diversion ratio and the innovation diversion ratio can help screen mergers. We also uncover a useful connection between the level of production synergies induced by a merger and its impact on innovation.

Keywords: Horizontal Mergers; Innovation; Competition (search for similar items in EconPapers)
Date: 2024-07-28
Note: View the original document on HAL open archive server: https://hal.science/hal-04790973v1
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Working Paper: Horizontal Mergers and Incremental Innovation (2024)
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