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Duplicative research, mergers and innovation

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  • Denicolo, Vincenzo
  • Polo, Michele

Abstract

We show that in the model of Federico, Langus and Valletti (2017) [A simple model of mergers and innovation, Economics Letters, 157, 136-140] horizontal mergers may actually spur innovation by preventing duplication of R&D efforts. This possibility is more likely, the greater is the value of innovations, the less rapidly diminishing are the returns to R&D, and the more highly correlated are the R&D projects of different firms. Federico, Langus and Valletti (2017) do not obtain this result because they focus only on the case in which the merged firm spreads total R&D expenditure evenly across the individual research units of the merging firms -- a strategy which is optimal, however, only if the returns to R&D diminish sufficiently rapidly.

Suggested Citation

  • Denicolo, Vincenzo & Polo, Michele, 2017. "Duplicative research, mergers and innovation," CEPR Discussion Papers 12511, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:12511
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    1. repec:fth:harver:1473 is not listed on IDEAS
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    More about this item

    Keywords

    Horizontal mergers; Innovation;

    JEL classification:

    • L00 - Industrial Organization - - General - - - General

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