The Effect of Mergers on the Incentive to Invest in Cost Reducing Innovations
AbstractBoth mergers and innovation are central elements of a firm’s competitive strategy. However, model-theoretical analysis of the merger-innovation link is sparse. The aim of this paper is to analyze the impact of mergers on innovative activities and product market competition in the context of incremental process innovations. Inefficiencies due to organizational problems of mergers are accounted for. We show that optimal investment strategies depend on the resulting market structure and differ significantly from insider to outsider. In our linear model mergers turn out to increase social surplus.
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Bibliographic InfoPaper provided by Bavarian Graduate Program in Economics (BGPE) in its series Working Papers with number 011.
Length: 38 pages
Date of creation: Dec 2006
Date of revision:
Horizontal mergers; innovation; research joint venture; market structure;
Find related papers by JEL classification:
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
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