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Mergers and demand-enhancing innovation

Author

Listed:
  • Marc Bourreau

    (ECOGE - Economie Gestion - I3 SES - Institut interdisciplinaire de l’innovation de Telecom Paris - Télécom ParisTech - I3 - Institut interdisciplinaire de l’innovation - CNRS - Centre National de la Recherche Scientifique, SES - Département Sciences Economiques et Sociales - Télécom ParisTech)

  • Bruno Jullien

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CNRS - Centre National de la Recherche Scientifique)

  • Yassine Lefouili

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

We study the impact of horizontal mergers on merging firms' incentives to invest in demand-enhancing innovation. In our baseline model, we identify four effects of a symmetric merger on these incentives: the innovation diversion effect, the margin expansion effect, the demand expansion effect, and the per unit return to innovation effect. We offer succient conditions for a merger to reduce or raise merging firms' incentives to innovate in the absence of spillovers and effciency gains in R&D, and find that a comparison between the innovation diversion and price diversion ratios is informative about the impact of a merger on innovation.

Suggested Citation

  • Marc Bourreau & Bruno Jullien & Yassine Lefouili, 2024. "Mergers and demand-enhancing innovation," Working Papers hal-04548184, HAL.
    • Handle: RePEc:hal:wpaper:hal-04548184
    Note: View the original document on HAL open archive server: https://hal.science/hal-04548184
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    Keywords

    Horizontal Mergers; Innovation; Competition;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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