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A New model of mergers and innovation

Author

Listed:
  • Piuli Roy Chowdhury

    (Indira Gandhi Institute of Development Research
    Institute of Economic Growth)

Abstract

This paper reexamines the impact of merger on innovation. Unlike as in Federico et al (2017), it considers the scenario where merged firms combine their research labs. It shows that, in equilibrium, each firm chooses a higher R&D effort after the merger, while industry effort may rise or fall due to the merger. Furthermore, it shows that given a sufficient condition, profits of the merged firm falls and consumer surplus rises in the post merger scenario. These results are in sharp contrast to the findings of Federico et al (2017).

Suggested Citation

  • Piuli Roy Chowdhury, 2018. "A New model of mergers and innovation," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2018-009, Indira Gandhi Institute of Development Research, Mumbai, India.
    • Handle: RePEc:ind:igiwpp:2018-009
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    File URL: http://www.igidr.ac.in/pdf/publication/WP-2018-009.pdf
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    More about this item

    Keywords

    Innovation; R&D; Mergers;
    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
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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