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Horizontal Mergers, Firm Heterogeneity, and R&D Investments

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  • Matsushima Noriaki

    (Institute of Social and Economic Research, Osaka University, 6-1 Mihogaoka, Ibaraki, Osaka 567-0047, Japan)

  • Sato Yasuhiro

    (Graduate School of Economics, Osaka University, 1-31 Machikaneyama, Toyonaka, Osaka 560-0043, Japan)

  • Yamamoto Kazuhiro

    (Graduate School of Economics, Osaka University, 1-31 Machikaneyama, Toyonaka, Osaka 560-0043, Japan)

Abstract

We investigate the incentive and welfare implications of a merger when heterogeneous oligopolists compete both in process R&D and on the product market. We examine how a merger affects the output, investment, and profits of firms. In addition, we examine whether firms have merger incentives, and, if so, whether such mergers are desirable from the viewpoint of social welfare. If R&D is not expensive and if large cost differences between efficient and inefficient firms exist, a merger between homogeneous firms tends to occur even though it harms welfare.

Suggested Citation

  • Matsushima Noriaki & Sato Yasuhiro & Yamamoto Kazuhiro, 2013. "Horizontal Mergers, Firm Heterogeneity, and R&D Investments," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 13(2), pages 959-990, August.
    • Handle: RePEc:bpj:bejeap:v:13:y:2013:i:2:p:959-990:n:13
    DOI: 10.1515/bejeap-2012-0058
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    Cited by:

    1. Antonio Tesoriere, 2021. "Drastic innovation reduces firms’ incentives to create divisions," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 38(3), pages 971-994, October.
    2. Ben Ferrett & Joanna Poyago-Theotoky, 2016. "Horizontal Agreements and R&D Complementarities: Merger versus RJV," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 23(1), pages 87-107, February.
    3. Bourreau, Marc & Jullien, Bruno & Lefouili, Yassine, 2018. "Horizontal Mergers and Incremental Innovation," TSE Working Papers 18-907, Toulouse School of Economics (TSE), revised Jul 2024.
    4. Cabolis, C. & Manasakis, C., 2016. "R&D investments fostering horizontal mergers," UC3M Working papers. Economics 23280, Universidad Carlos III de Madrid. Departamento de Economía.
    5. Jullien, Bruno & Lefouili, Yassine, 2018. "Horizontal Mergers and Innovation," CEPR Discussion Papers 12773, C.E.P.R. Discussion Papers.
    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. Gamal Atallah, 2016. "Endogenous Efficiency Gains from Mergers," Southern Economic Journal, John Wiley & Sons, vol. 83(1), pages 202-235, July.
    8. Luis Gautier & Mahelet G. Fikru, 2024. "Environmental Taxation and Mergers in Oligopoly Markets with Product Differentiation," Natural Resource Management and Policy, in: Handbook of Merger Control and Environmental Policy, chapter 0, pages 185-206, Springer.
    9. Schmal W. Benedikt, 2023. "Downstream Profit Effects of Horizontal Mergers: Horn & Wolinsky and von Ungern-Sternberg Revisited," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 23(4), pages 981-1000, October.
    10. Dusanee Kesavayuth & Sang-Ho Lee & Vasileios Zikos, 2018. "Merger and Innovation Incentives in a Differentiated Industry," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 25(2), pages 207-221, May.
    11. Joanna Poyago-Theotoky & Ben Ferrett, "undated". "Horizontal Agreements and R&D Complementarities: Merger versus RJV," CRIEFF Discussion Papers 1201, Centre for Research into Industry, Enterprise, Finance and the Firm.
    12. Cabolis, C. & Manasakis, C. & Moreno, D. & Petrakis, E., 2021. "The interactions of R&D investments and horizontal mergers," Journal of Economic Behavior & Organization, Elsevier, vol. 187(C), pages 507-534.

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    More about this item

    Keywords

    mergers; oligopoly; R&D; heterogeneity;
    All these keywords.

    JEL classification:

    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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