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The role of innovation in merger policy: Europe’s efficiency defence versus America’s innovation markets approach. Two cases

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  • E. Cefis
  • M. Grondsma
  • A. Sabidussi
  • E.J.J. Schenk

Abstract

Changes in the world’s economies and discussions in the literature about the growing importance of innovation to firms have given rise to a demand for expanding the analysis of merger policy. The present study focuses on the different criteria used to assess the impact of M&A activities on innovation. The analysis is both theoretical and empirical. From a theoretical perspective, two main approaches are discussed: the efficiency defence approach, adopted in Europe, and the innovation markets doctrine as developed in the United States. The present paper contributes to the literature by suggesting that an integration of the two approaches would significantly improve M&A assessment. On the empirical side, two cases that have been scrutinised by both the European Commission and the U.S. Federal Trade Commission are discussed. The results show the relevance of the different approaches used when dealing with innovation in the assessment of mergers.

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Bibliographic Info

Paper provided by Utrecht School of Economics in its series Working Papers with number 07-21.

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Length: 36 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:use:tkiwps:0721

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Keywords: Mergers and Acquisitions; Innovation; Efficiency Defence;

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References

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  1. John Bound & Clint Cummins & Zvi Griliches & Bronwyn H. Hall & Adam B. Jaffe, 1984. "Who Does R&D and Who Patents?," NBER Chapters, in: R & D, Patents, and Productivity, pages 21-54 National Bureau of Economic Research, Inc.
  2. Eleanor Morgan, 2001. "Innovation and Merger Decisions in the Pharmaceutical Industry," Review of Industrial Organization, Springer, vol. 19(2), pages 181-197, September.
  3. Lars-Hendrik Röller & Johan Stennek & Frank Verboven, 2000. "Efficiency Gains from Mergers," CIG Working Papers FS IV 00-09, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  4. Schmalensee, Richard., 1987. "Inter-industry studies of structure and performance," Working papers 1874-87., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  5. Gunther Tichy, 2001. "What Do We Know about Success and Failure of Mergers?," Journal of Industry, Competition and Trade, Springer, vol. 1(4), pages 347-394, December.
  6. Jacques Cremer & Marvin A. Sirbu JR, 1978. "Une analyse économétrique de l'effort de recherche et développement de l'industrie française," Revue Économique, Programme National Persée, vol. 29(5), pages 940-957.
  7. Fabienne Ilzkovitz & Roderick Meiklejohn, 2003. "European Merger Control: Do We Need an Efficiency Defence?," Journal of Industry, Competition and Trade, Springer, vol. 3(1), pages 57-85, March.
  8. Cohen, Wesley M. & Levin, Richard C., 1989. "Empirical studies of innovation and market structure," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 18, pages 1059-1107 Elsevier.
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