Mergers, Corporate Financing, and Managerial Incentives in R&D Intensive Industries
AbstractWe characterise the interplay between oligopolistic firms' strategic decisions in product development, and their incentives for (or against) merger. In an R&D intensive industry where newly developed products can be awarded exclusive patent protection, individual firms' profit maximisation can result in effort duplication, which socially suboptimal. Such strategic incentives can be curtailed by  tightening corporate financing,  corporate profit taxation,  reduction in R&D subsidies, or  delegating product development decisions to short-lived managers. The former two ( and ) also discourage merger. On the other hand, the latter two ( and ) indirectly encourage merger, as the managerial incentives discouraged away from effort duplication are a consequence of oligopolistic competition, so that the owners of these firms have extra incentives toward merger to eliminate competition altogether.
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Bibliographic InfoPaper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 712.
Length: 19 pages
Date of creation: 1999
Date of revision:
Contact details of provider:
Postal: Department of Economics, The University of Melbourne, 5th Floor, Economics and Commerce Building, Victoria, 3010, Australia
Phone: +61 3 8344 5289
Fax: +61 3 8344 6899
Web page: http://www.economics.unimelb.edu.au
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PATENTS ; MERGERS ; RESEARCH AND DEVELOPMENT;
Find related papers by JEL classification:
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
- O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D
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