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A simple model of mergers and innovation

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Federico Langus Valletti Innovation Economic Letters 2017.pdfAccepted version318.83 kBAdobe PDFView/Open
Title: A simple model of mergers and innovation
Authors: Federico, G
Langus, G
Valletti, T
Item Type: Journal Article
Abstract: We analyze the impact of a merger on firms’ incentives to innovate. We show that the merging parties always decrease their innovation efforts post-merger while the outsiders to the merger respond by increasing their effort. A merger tends to reduce overall innovation. Consumers are always worse off after a merger. Our model calls into question the applicability of the “inverted-U” relationship between innovation and competition to a merger setting.
Issue Date: 13-Jun-2017
Date of Acceptance: 12-Jun-2017
URI: http://hdl.handle.net/10044/1/49146
DOI: https://dx.doi.org/10.1016/j.econlet.2017.06.014
ISSN: 1873-7374
Publisher: Elsevier
Start Page: 136
End Page: 140
Journal / Book Title: Economics Letters
Volume: 157
Copyright Statement: © 2017 Elsevier B.V. All rights reserved. This manuscript is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/
Keywords: Economics
14 Economics
Publication Status: Published
Appears in Collections:Imperial College Business School