Acquisition-induced kill zone

Christopher Teh (), Dyuti Banerjee () and Chengsi Wang
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Christopher Teh: UNSW Sydney
Dyuti Banerjee: Department of Economics, Monash University

No 2022-24, Monash Economics Working Papers from Monash University, Department of Economics

Abstract: We study the impact of a dominant incumbent’s acquisition on entry and R&D incentives in a model with multiple start-ups. The incumbent’s acquisition directly suppresses entry and can distort the non-target start-up’s R&D incentives by creating a kill zone. The reduced threat of entry can also cause the incumbent to shelve the acquired technology. Despite these negative effects, acquisitions generally affect consumer welfare ambiguously due to synergy benefits. We study the design of merger policies aimed at minimizing acquisition-related harms. We also show that entry-for-buyout may not be a valid defense for start-up acquisitions when accounting for non-target start-ups.

Keywords: Acquisitions; Innovation; Start-ups; Merger Policy; Remedies (search for similar items in EconPapers)
JEL-codes: G34 L12 L41 O31 (search for similar items in EconPapers)
Date: 2022-12
New Economics Papers: this item is included in nep-com, nep-ent, nep-ind, nep-ino, nep-mic, nep-reg and nep-sbm
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Citations: View citations in EconPapers (2)

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