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Innovation and social desirability of merger

  • Arijit Mukherjee


    (Loughborough University)

  • Prabal Roy chowdhury


    (Indian Statistical Institute)

Although regulatory authorities are putting more emphasis to the long-run effects of mergers and acquisitions due to their effects on innovation, several merger proposals have been challenged due to their adverse innovation effects. In a simple model with endogenous R&D investment, we show that the effects of merger on the R&D investment, consumer surplus and social welfare depend on the degree of knowledge spillover and the slope of the marginal cost of doing R&D. Hence, the social desirability of merger may depend on the effectiveness of the patent system and the cost of innovation.

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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 33 (2013)
Issue (Month): 1 ()
Pages: 348-360

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Handle: RePEc:ebl:ecbull:eb-12-00489
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