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Startup acquisitions and merger policy

Author

Listed:
  • Christopher Teh

    (Toulouse School of Economics, 31000 Toulouse, France & School of Economics,)

  • Chengsi Wang

    (Department of Economics and Monash Digital Lab, Monash University)

Abstract

This article critically examines recent economic theories on the relationship between startup acquisitions and innovation. We argue that the prevalence of killer acquisitions is likely overstated, even from a purely theoretical perspective. We further show that the entry-for-buyout effect may not always hold: relaxing merger control does not necessarily lead startups to invest more or pursue more disruptive innovation. Effective merger policy must adopt a dynamic perspective, balancing short-term competitive harms against long-terminnovation benefits. The article concludes with practical policy recommendations for the design and enforcement of merger control.

Suggested Citation

  • Christopher Teh & Chengsi Wang, 2025. "Startup acquisitions and merger policy," Monash Economics Working Papers 2025-15, Monash University, Department of Economics.
    • Handle: RePEc:mos:moswps:2025-15
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    Keywords

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    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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