Mergers and Innovation: Evidence from the Hard Disk Drive Market
63 Pages Posted: 19 Jun 2018 Last revised: 8 Jun 2020
Date Written: June 5, 2020
This is an ex-post evaluation of how innovation changed following mergers and subsequent policy interventions, using an industry case study involving the 5-to-3 consolidation of three related mergers in the worldwide hard disk drive (HDD) industry, in 2011/12. Unlike most previous empirical papers in the merger-innovation literature, it drills down to the firm level to explore heterogeneity in the innovation response to the merger. It adopts a holistic view of innovation, employing four different measures: R\&D and patents as indicators of innovative inputs, and the number of new models, and their unit prices as indicators of innovative output. This allows us to distinguish the magnitude of the merging parties’ innovative efforts from the productivity of those efforts. The results confirm that there are indeed important asymmetries between the players, which are at least partly attributable to differences in the severity of remedies required by competition authorities. Methodologically, the paper sheds light on some of the challenges when conducting future retrospective studies on innovation, in a market which is world-wide with no obvious comparators, and at a specific part of its product cycle, which may be difficult to replicate in a comparator industry.
Keywords: Mergers, Innovation, R&D, Patents, Evaluation
JEL Classification: O30, L10, L40
Suggested Citation: Suggested Citation