Mergers and Investments in New Products

Bruno Jullien and Yassine Lefouili

No 18-949, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: We investigate the impact of a horizontal merger between two competitors on their incentives to invest in R&D that generates new products. We show that a merger raises the incentives to innovate if and only if the merged entity’s incremental gain from a second innovation is greater than the individual profit of a firm when both firms innovate in the no-merger scenario. Applying this result to the Hotelling model, we find that a merger spurs innovation if the degree of product differentiation is not too high, and show that a merger can be beneficial to consumers.

Keywords: Horizontal Mergers; Product Innovation; R&D Investments. (search for similar items in EconPapers)
JEL-codes: K21 L13 L40 (search for similar items in EconPapers)
Date: 2018-08, Revised 2020-08
New Economics Papers: this item is included in nep-com, nep-ind, nep-ino, nep-law and nep-mic
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:32923

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