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Mergers and Innovation Portfolios

Jose Moraga-Gonzalez (), Evgenia Motchenkova and Saish Nevrekar
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Saish Nevrekar: Universidad Carlos III de Madrid

No 19-085/VII, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: This paper studies mergers in markets where firms invest in a portfolio of research projects of different profitability and social value. The portfolio nature of the investment problem brings about novel insights on the external effects of firms’ investments. The investment of a firm in one project imposes a negative business-stealing externality on the rival firms because it lowers the probability they win the innovation contest for that project; however, the investment of a firm in one project also exerts a positive business-giving externality on the rival firms because it increases the likelihood they win the contest for the alternative project.

Keywords: innovation portfolios; R&D contests; mergers (search for similar items in EconPapers)
JEL-codes: O32 L13 L22 O31 (search for similar items in EconPapers)
Date: 2019-12-08
New Economics Papers: this item is included in nep-cfn, nep-com, nep-cse, nep-ind, nep-ino, nep-mic, nep-ore, nep-ppm and nep-sbm
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Working Paper: Mergers and Innovation Portfolios (2019) Downloads
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