Mergers and Demand-Enhancing Innovation

Bourreau, Marc, Jullien, Bruno and Lefouili, Yassine (2018) Mergers and Demand-Enhancing Innovation. TSE Working Paper, n. 18-907, Toulouse

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Official URL: http://tse-fr.eu/pub/32578

Abstract

This paper investigates the impact of horizontal mergers on firms' incentives to invest in demand-enhancing innovation. In our baseline model, we identify three key effects of a merger on the merging firms' incentives to innovate: the margin expansion effect, the demand expansion effect, and the innovation diversion effect. The first effect is negative, while the second is positive and the third can be either positive or negative depending on the nature of the innovation. We show that the overall impact of a merger on innovation can be either positive or negative and provide sufficient conditions and specific models under which each of these two scenarios arises. Finally, we extend our model to incorporate spillovers and synergies in R&D.

Item Type: Monograph (Working Paper)
Language: English
Date: March 2018
Place of Publication: Toulouse
Uncontrolled Keywords: Horizontal Mergers, Innovation, Competition
JEL codes: D43 - Oligopoly and Other Forms of Market Imperfection
L13 - Oligopoly and Other Imperfect Markets
L40 - General
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 24 Apr 2018 11:30
Last Modified: 20 Nov 2018 13:18
OAI ID: oai:tse-fr.eu:32578
URI: http://publications.ut-capitole.fr/id/eprint/25893

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