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Horizontal Mergers and Incremental Innovation

Author

Listed:
  • Marc Bourreau

    (Centre de Recherche en Économie et Statistique (CREST) - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique)

  • Bruno Jullien

    (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)

  • Yassine Lefouili

    (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)

Abstract

We study the impact of horizontal mergers on the incentives of merging …rms to invest in incremental innovation. We provide a decomposition of this impact that clari…es the various forces at work and the di¤erences between demand-enhancing and cost-reducing innovation. Moreover, we derive su¢ cient conditions for a merger to either reduce or raise the merging …rms'incentives to innovate, and show that the comparison of the price diversion ratio and the innovation diversion ratio can help screen mergers. We also uncover a useful connection between the level of production synergies induced by a merger and its impact on innovation.

Suggested Citation

  • Marc Bourreau & Bruno Jullien & Yassine Lefouili, 2024. "Horizontal Mergers and Incremental Innovation," Working Papers hal-04790973, HAL.
    • Handle: RePEc:hal:wpaper:hal-04790973
    Note: View the original document on HAL open archive server: https://hal.science/hal-04790973v1
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    Cited by:

    1. is not listed on IDEAS
    2. Malin Arve & Øystein Foros & Hans Jarle Kind, 2022. "Access price structure and entrant build-or-buy incentives in mobile markets," Journal of Regulatory Economics, Springer, vol. 61(1), pages 67-87, February.
    3. Maarten Pieter Schinkel & Leonard Treuren, 2021. "Corporate Social Responsibility by Joint Agreement," Tinbergen Institute Discussion Papers 21-063/VII, Tinbergen Institute.
    4. Bruno Jullien & Yassine Lefouili, 2018. "Horizontal mergers and innovation," Post-Print hal-03263838, HAL.
    5. Allain, Marie-Laure & Bourreau, Marc & Darlas, Pierre-François, 2025. "Digital business models and quality investment," International Journal of Industrial Organization, Elsevier, vol. 103(PA).
    6. Etro, Federico, 2019. "Mergers of complements and entry in innovative industries," International Journal of Industrial Organization, Elsevier, vol. 65(C), pages 302-326.
    7. Igor Letina & Armin Schmutzler & Regina Seibel, 2024. "Killer Acquisitions And Beyond: Policy Effects On Innovation Strategies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(2), pages 591-622, May.
    8. Brunner, Philipp & Letina, Igor & Schmutzler, Armin, 2024. "Research joint ventures: The role of financial constraints," European Economic Review, Elsevier, vol. 165(C).
    9. Marc Bourreau & Axel Gautier, 2024. "Innovation and Startup Acquisition," CESifo Working Paper Series 11569, CESifo.
    10. Marc Bourreau & Yutec Sun, 2022. "Competition and Quality: Evidence from the Entry of Mobile Network Service," Working Papers 22-04, NET Institute.
    11. Volker Nocke & Nicolas Schutz, 2025. "An Aggregative Games Approach to Merger Analysis in Multiproduct‐Firm Oligopoly," RAND Journal of Economics, RAND Corporation, vol. 56(3), pages 233-250, September.
    12. Haucap, Justus & Stiebale, Joel, 2023. "Non-price effects of mergers and acquisitions," DICE Discussion Papers 402, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    13. Yassine Lefouili & Leonardo Madio, 2025. "Mergers and Investments: Where Do We Stand?," Working Papers hal-05129593, HAL.
    14. 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.
    15. Laureen de Barsy & Axel Gautier, 2024. "Big Tech Acquisitions and Innovation: An Empirical Assessment," CESifo Working Paper Series 11025, CESifo.

    More about this item

    Keywords

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    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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