Horizontal Mergers and Incremental Innovation

Marc Bourreau, Bruno Jullien and Yassine Lefouili

No 18-907, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: We study the impact of horizontal mergers on the incentives of merging firms to invest in incremental innovation. We provide a decomposition of this impact that clarifies the various forces at work and the differences between demand-enhancing and cost-reducing innovation. Moreover, we derive sufficient conditions for a merger to either reduce or raise the merging firms’ 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.

Keywords: Horizontal Mergers; Innovation; Competition (search for similar items in EconPapers)
JEL-codes: D43 L13 L40 (search for similar items in EconPapers)
Date: 2018-03, Revised 2024-07
New Economics Papers: this item is included in nep-com, nep-ind, nep-ino, nep-mic and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:32578

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