Merger and process innovation

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.

Citation

Mukherjee, A. (2022). Merger and process innovation. Economics Letters, 213, Article 110366. https://doi.org/10.1016/j.econlet.2022.110366

• Journal Article Type: Article
• Acceptance Date: Feb 4, 2022
• Online Publication Date: Mar 5, 2022
• Publication Date: Apr 1, 2022
• Deposit Date: Jun 17, 2022
• Publicly Available Date: Jun 21, 2022
• Journal: Economics Letters
• Print ISSN: 0165-1765
• Electronic ISSN: 1873-7374
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 213
• Article Number: 110366
• DOI: https://doi.org/10.1016/j.econlet.2022.110366
• Keywords: Economics and Econometrics; Finance
• Public URL: https://nottingham-repository.worktribe.com/output/8501079
• Publisher URL: https://www.sciencedirect.com/science/article/pii/S0165176522000520