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Acquisition-induced kill zones

Author

Listed:
  • Christopher Teh

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Dyuti Banerjee

    (Monash University [Melbourne])

  • Chengsi Wang

    (Monash University [Melbourne])

Abstract

We study how acquisitions by a dominant incumbent affect entry and R&D incentives in markets with multiple startups. We show that acquisitions can create a kill zone, which suppresses entry and distorts the innovation direction of nontargeted startups. The resulting reduced threat of entry may lead the incumbent to shelve the acquired technology. The kill zone effect strengthens targeted startups' incentives to enter primarily to be bought out and makes acquisitions more attractive to the incumbent than in-house R&D. To balance kill zone distortions to innovation against the potential synergies from acquisitions, a consumer welfare–maximizing merger policy may involve blocking some, but not all, acquisitions.

Suggested Citation

  • Christopher Teh & Dyuti Banerjee & Chengsi Wang, 2026. "Acquisition-induced kill zones," Post-Print hal-05691158, HAL.
    • Handle: RePEc:hal:journl:hal-05691158
    DOI: 10.1287/mnsc.2024.07841
    as

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