Killer acquisitions and beyond: policy effects on innovation strategies

Igor Letina, Armin Schmutzler and Regina Seibel

No 358, ECON - Working Papers from Department of Economics - University of Zurich

Abstract: This paper provides a theory of strategic innovation project choice by incumbents and start-ups which serves as a foundation for the analysis of acquisition policy. We show that, in spite of countervailing incentives on incumbents and entrants, prohibiting acquisitions has a weakly negative overall innovation effect. We provide conditions determining the size of the effect and, in particular, conditions under which it is zero. We further analyze the effects of less restrictive policies, including merger remedies and the tax treatment of acquisitions and initial public offerings. Such interventions tend to prevent acquisitions only if the entrant has sufficiently high stand-alone profits.

Keywords: Innovation; killer acquisitions; merger policy; potential competition; start-ups (search for similar items in EconPapers)
JEL-codes: G34 L41 O31 (search for similar items in EconPapers)
Date: 2020-08, Revised 2023-07
New Economics Papers: this item is included in nep-com, nep-ino and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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https://www.zora.uzh.ch/id/eprint/189748/19/econwp358.pdf (application/pdf)

Related works:
Journal Article: KILLER ACQUISITIONS AND BEYOND: POLICY EFFECTS ON INNOVATION STRATEGIES (2024)
Working Paper: Killer Acquisitions and Beyond: Policy Effects on Innovation Strategies (2021)
Working Paper: Killer Aquisitions and Beyond: Policy Effects on Innovation Strategies (2021)
Working Paper: Killer Acquisitions and Beyond: Policy Effects on Innovation Strategies (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:zur:econwp:358

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