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Merger and process innovation

Author

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  • Mukherjee, Arijit
Abstract
Denicolò and Polo (2018) show that the result of Federico et al. (2017), i.e., horizontal mergers reduce R&D investments of the merged firms compared to non-cooperation, holds provided the probability of failure in R&D is log-convex in R&D investments. We provide a different reason for innovation raising merger. We show that if firms invest in process innovation, merger may increase R&D investments even if the probability of failure in R&D is log-convex in R&D investments as considered in Federico et al. (2017). We also show that merger may increase expected consumer surplus and expected welfare compared to non-cooperation. Our results are important for antitrust policies.

Suggested Citation

  • Mukherjee, Arijit, 2022. "Merger and process innovation," Economics Letters, Elsevier, vol. 213(C).
    • Handle: RePEc:eee:ecolet:v:213:y:2022:i:c:s0165176522000520
    DOI: 10.1016/j.econlet.2022.110366
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    References listed on IDEAS

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    1. Bourreau, Marc & Jullien, Bruno, 2018. "Mergers, investments and demand expansion," Economics Letters, Elsevier, vol. 167(C), pages 136-141.
    2. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626, National Bureau of Economic Research, Inc.
    3. Denicolò, Vincenzo & Polo, Michele, 2018. "Duplicative research, mergers and innovation," Economics Letters, Elsevier, vol. 166(C), pages 56-59.
    4. Federico, Giulio & Langus, Gregor & Valletti, Tommaso, 2017. "A simple model of mergers and innovation," Economics Letters, Elsevier, vol. 157(C), pages 136-140.
    5. Ángel L. López & Xavier Vives, 2019. "Overlapping Ownership, R&D Spillovers, and Antitrust Policy," Journal of Political Economy, University of Chicago Press, vol. 127(5), pages 2394-2437.
    6. Federico, Giulio & Langus, Gregor & Valletti, Tommaso, 2018. "Reprint of: Horizontal mergers and product innovation," International Journal of Industrial Organization, Elsevier, vol. 61(C), pages 590-612.
    7. Federico, Giulio & Langus, Gregor & Valletti, Tommaso, 2018. "Horizontal mergers and product innovation," International Journal of Industrial Organization, Elsevier, vol. 59(C), pages 1-23.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Mukherjee, Arijit & Ray, Achintya, 2024. "Pro-competitive merger under R&D revisited," Economics Letters, Elsevier, vol. 239(C).
    2. Lefouili, Yassine & Madio, Leonardo, 2023. "Market Structure and Investments : A Progress Report," TSE Working Papers 23-1491, Toulouse School of Economics (TSE), revised Sep 2024.
    3. Mukherjee, Arijit, 2023. "Merger and product innovation under cross ownership and cooperative R&D," Economics Letters, Elsevier, vol. 233(C).
    4. Sugata Marjit & Krishnendu Ghosh Dastidar & Gouranga Gopal Das, 2022. "Market Size and Number of Firms with New Technology," CESifo Working Paper Series 9934, CESifo.
    5. Hamid Beladi & Avik Chakrabarti, 2023. "Export upstreamness and financial development," Economics Bulletin, AccessEcon, vol. 43(3), pages 1514-1518.

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    More about this item

    Keywords

    Innovation; Merger; Welfare;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L00 - Industrial Organization - - General - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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