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Duplicative research, mergers and innovation

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  • Denicol�, 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.

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  • Denicol�, 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
    2. Bourreau, Marc & Jullien, Bruno, 2018. "Mergers, investments and demand expansion," Economics Letters, Elsevier, vol. 167(C), pages 136-141.
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    Cited by:

    1. Tommaso Valletti & Hans Zenger, 2021. "Mergers with Differentiated Products: Where Do We Stand?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 58(1), pages 179-212, February.
    2. Alexandre Carbonnel, 2021. "Can foreclosure benefit consumers? The case of innovation in new markets," Economics Bulletin, AccessEcon, vol. 41(3), pages 1471-1480.
    3. Federico, Giulio & Langus, Gregor & Valletti, Tommaso, 2018. "Horizontal mergers and product innovation," International Journal of Industrial Organization, Elsevier, vol. 59(C), pages 1-23.
    4. Bourreau, Marc & Jullien, Bruno & Lefouili, Yassine, 2018. "Mergers and Demand-Enhancing Innovation," TSE Working Papers 18-907, Toulouse School of Economics (TSE), revised Apr 2021.
    5. Denicolò, Vincenzo & Polo, Michele, 2021. "Mergers and innovation sharing," Economics Letters, Elsevier, vol. 202(C).
    6. Motta, Massimo & Tarantino, Emanuele, 2021. "The effect of horizontal mergers, when firms compete in prices and investments," International Journal of Industrial Organization, Elsevier, vol. 78(C).
    7. Frédéric Marty & Thierry Warin, 2020. "Visa Acquiring Plaid: A Tartan over a Killer Acquisition? Reflections on the risks of harming competition through the acquisition of startups within digital ecosystems," CIRANO Working Papers 2020s-62, CIRANO.
    8. Bourreau, Marc & Jullien, Bruno, 2018. "Mergers, investments and demand expansion," Economics Letters, Elsevier, vol. 167(C), pages 136-141.
    9. Etro, Federico, 2019. "Mergers of complements and entry in innovative industries," International Journal of Industrial Organization, Elsevier, vol. 65(C), pages 302-326.
    10. Basant, Rakesh & Jaiswal, Neha, 2022. "Impact of Mergers and Acquisitions on Innovation: Evidence from a Panel of Indian Pharmaceutical Firms," IIMA Working Papers WP 2022-01-01, Indian Institute of Management Ahmedabad, Research and Publication Department.
    11. Igor Letina & Armin Schmutzler & Regina Seibel, 2020. "Killer acquisitions and beyond: policy effects on innovation strategies," ECON - Working Papers 358, Department of Economics - University of Zurich, revised Oct 2021.
    12. Nobuyuki Takashima & Yasunori Ouchida, 2020. "Quality‐improving R&D and merger policy in a differentiated duopoly: Cournot and Bertrand equilibria," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(7), pages 1338-1348, October.
    13. Federico, Giulio & Langus, Gregor & Valletti, Tommaso, 2018. "Reprint of: Horizontal mergers and product innovation," International Journal of Industrial Organization, Elsevier, vol. 61(C), pages 590-612.
    14. Mukherjee, Arijit, 2022. "Merger and process innovation," Economics Letters, Elsevier, vol. 213(C).
    15. Cojoc, Anca & Ivaldi, Marc & Maier-Rigaud, Frank P. & März, Oliver, 2020. "Horizontal cooperation on investment: Evidence from mobile network sharing," TSE Working Papers 20-1100, Toulouse School of Economics (TSE).
    16. Haucap, Justus & Rasch, Alexander & Stiebale, Joel, 2019. "How mergers affect innovation: Theory and evidence," International Journal of Industrial Organization, Elsevier, vol. 63(C), pages 283-325.
    17. Calvano, Emilio & Polo, Michele, 2021. "Market power, competition and innovation in digital markets: A survey," Information Economics and Policy, Elsevier, vol. 54(C).
    18. Giulio Federico & Fiona Scott Morton & Carl Shapiro, 2019. "Antitrust and Innovation: Welcoming and Protecting Disruption," NBER Chapters, in: Innovation Policy and the Economy, Volume 20, pages 125-190, National Bureau of Economic Research, Inc.
    19. Anna Rita Bennato & Stephen Davies & Franco Mariuzzo & Peter Ormosi, 2019. "Mergers and Innovation: Evidence from the Hard Disk Drive Market," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2018-04v3, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    20. Dragone, Davide & Lambertini, Luca & Palestini, Arsen, 2022. "Emission taxation, green innovations and inverted-U aggregate R&D efforts in a linear state differential game," Research in Economics, Elsevier, vol. 76(1), pages 62-68.
    21. Chunhuan Xiao & Ziyin Zhuang & Amei Feng, 2021. "OFDI Entry Modes and Firms’ Innovation: Evidence from Chinese A-Share Listed Firms," Sustainability, MDPI, vol. 13(14), pages 1-17, July.
    22. Richard J. Gilbert, 2019. "Competition, Mergers, and R&D Diversity," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 54(3), pages 465-484, May.
    23. Cabolis, C. & Manasakis, C. & Moreno, D. & Petrakis, E., 2021. "The interactions of R&D investments and horizontal mergers," Journal of Economic Behavior & Organization, Elsevier, vol. 187(C), pages 507-534.

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    More about this item

    Keywords

    Horizontal mergers; Innovation;

    JEL classification:

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

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