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Complementarities and spill-overs in mergers: an empirical investigation using patent data

  • Marco, Alan C.
  • Rausser, Gordon C.

Many recent empirical studies have examined the effect of the patent system on R&D, innovation and patenting behavior. However, few micro-level empirical papers have addressed the impact of the patent system on industry structure. In this paper we build on our previous work to investigate merger activity of firms in light of their patent holdings. We use agricultural biotechnology as an example. Three innovations are introduced: firm-level patent data is investigated as a predictor of merger activity; second, we develop a measure of patent enforceability based on patent litigation data; third, we combine both duration models and logic models in order to investigate both the timing of mergers and the matching of merger partners. The empirical results demonstrate that patent statistics are a useful predictor of merger activity; mergers in agricultural biotechnology appear to be partially motivated by difficulties in enforcing patent rights when firms have overlapping technologies; and some of the merger activity may be explained by attempts to reduce spillovers.

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Paper provided by Department of Agricultural & Resource Economics, UC Berkeley in its series Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series with number qt93s769k8.

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Date of creation: 12 Jun 2002
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Handle: RePEc:cdl:agrebk:qt93s769k8
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  10. Pakes, Ariel, 1985. "On Patents, R&D, and the Stock Market Rate of Return," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 390-409, April.
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  12. Merges, Robert P. & Nelson, Richard R., 1994. "On limiting or encouraging rivalry in technical progress: The effect of patent scope decisions," Journal of Economic Behavior & Organization, Elsevier, vol. 25(1), pages 1-24, September.
  13. Schweizer, Urs, 1989. "Litigation and Settlement under Two-Sided Incomplete Information," Review of Economic Studies, Wiley Blackwell, vol. 56(2), pages 163-77, April.
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  16. Reinganum, Jennifer F., 1989. "The timing of innovation: Research, development, and diffusion," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 14, pages 849-908 Elsevier.
  17. Werden, G.J. & Froeb, L.M. & Tardiff, T.J., 1994. "The Use of the Logit Model in Applied Industrial Organization," Papers 94-1, U.S. Department of Justice - Antitrust Division.
  18. Jaggia, Sanjiv & Thosar, Satish, 1995. "Contested Tender Offers: An Estimate of the Hazard Function," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(1), pages 113-19, January.
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  20. Joel Waldfogel, 1993. "The Selection Hypothesis and the Relationship between Trial and Plaintiff Victory," NBER Working Papers 4508, National Bureau of Economic Research, Inc.
  21. Choi, J.P., 1997. "Patent Litigation as an Information Transmission Mechanism," Discussion Paper 1997-17, Tilburg University, Center for Economic Research.
  22. Dickerson, Andrew P & Gibson, Heather D & Tsakalotos, Euclid, 1998. "Takeover Risk and Dividend Strategy: A Study of UK Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 46(3), pages 281-300, September.
  23. Ugur Tony Sinay, 1998. "Pre- and Post-Merger Investigation of Hospital Mergers," Eastern Economic Journal, Eastern Economic Association, vol. 24(1), pages 83-97, Winter.
  24. Theodore Eisenberg & Henry S. Farber, 1996. "The Litigious Plaintiff Hypothesis: Case Selection and Resolution," NBER Working Papers 5649, National Bureau of Economic Research, Inc.
  25. Bacon, Frank W. & Shin, Tai S. & Murphy, Neil B., 1994. "Factors motivating mergers: The case of rural electric cooperatives," Journal of Economics and Business, Elsevier, vol. 46(2), pages 129-134, May.
  26. Francesca Cornelli & Mark Schankerman, 1999. "Patent Renewals and R&D Incentives," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 197-213, Summer.
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