M&As, Innovation and Superstar Firms

Maria Martinez Cillero (), Lorenzo Napolitano (), Francesco Rentocchini (), Cecilia Seri and Elena Zaurino ()
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Maria Martinez Cillero: European Commission - JRC, https://joint-research-centre.ec.europa.eu/index_en
Lorenzo Napolitano: European Commission - JRC, https://joint-research-centre.ec.europa.eu/index_en
Francesco Rentocchini: European Commission - JRC, https://joint-research-centre.ec.europa.eu/index_en
Elena Zaurino: European Commission - JRC, https://joint-research-centre.ec.europa.eu/index_en

No 2025-03, JRC Working Papers on Corporate R&D and Innovation from Joint Research Centre

Abstract: "Rising market concentration and the dominance of `superstar' firms have sparked concerns about declining competition and innovation. While technological change and globalisation are key drivers, mergers and acquisitions (M&As) may also play a role. This paper investigates whether firms use technological M&As — acquisitions of innovative subsidiaries with patent portfolios — to enhance market power. Using a global panel of 8,314 publicly listed firms from 2008 to 2020 and a staggered difference-in-differences approach, we find that such acquisitions increase acquiring firms’ markups by 2% on average. Effects are stronger among top R&D investors, US-based firms, and those in high-tech manufacturing. The main mechanism appears to be greater insulation from competitors via acquired patents, which limit knowledge spillovers and raise entry barriers. These findings highlight the need for antitrust policies that balance innovation incentives with the risks of growing market power."

Date: 2025-09
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