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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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    References listed on IDEAS

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    1. repec:fth:harver:1473 is not listed on IDEAS
    2. Bourreau, Marc & Jullien, Bruno, 2018. "Mergers, investments and demand expansion," Economics Letters, Elsevier, vol. 167(C), pages 136-141.
    3. repec:oup:ecpoli:v:22:y:2007:i::p:679-729 is not listed on IDEAS
    4. Federico, Giulio & Langus, Gregor & Valletti, Tommaso, 2017. "A simple model of mergers and innovation," Economics Letters, Elsevier, vol. 157(C), pages 136-140.
    5. W. Salant, Stephen & Shaffer, Greg, 1998. "Optimal asymmetric strategies in research joint ventures," International Journal of Industrial Organization, Elsevier, vol. 16(2), pages 195-208, March.
    6. Federico, Giulio & Langus, Gregor & Valletti, Tommaso, 2018. "Horizontal mergers and product innovation," International Journal of Industrial Organization, Elsevier, vol. 59(C), pages 1-23.
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    8. Zvi Griliches, 1998. "Patent Statistics as Economic Indicators: A Survey," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 287-343, National Bureau of Economic Research, Inc.
    9. Vincenzo Denicolò, 2007. "Do patents over-compensate innovators? [‘State-dependent intellectual property rights policy’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 22(52), pages 680-729.
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    More about this item

    Keywords

    Horizontal mergers; Innovation;

    JEL classification:

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

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