Mergers and Innovation Portfolios

Moraga-González, José L.; Motchenkova, Evgenia; Nevrekar, Saish

doi:10.2139/ssrn.3500382

Mergers and Innovation Portfolios

Tinbergen Institute Discussion Paper 2019-085/VII

53 Pages Posted: 31 Dec 2019

See all articles by José L. Moraga-González

José L. Moraga-González

VU University Amsterdam; University of Groningen

Evgenia Motchenkova

VU University Amsterdam - Department of Economics; TILEC

Saish Nevrekar

Universidad Carlos III de Madrid

There are 3 versions of this paper

Date Written: December 6, 2019

Abstract

This paper studies mergers in markets where firms invest in a portfolio of research projects of different profitability and social value. The portfolio nature of the investment problem brings about novel insights on the external effects of firms’ investments. The investment of a firm in one project imposes a negative business-stealing externality on the rival firms because it lowers the probability they win the innovation contest for that project; however, the investment of a firm in one project also exerts a positive business-giving externality on the rival firms because it increases the likelihood they win the contest for the alternative project.

Keywords: innovation portfolios, R&D contests, mergers

JEL Classification: O32, L13, L22, O31

Suggested Citation: Suggested Citation

Moraga-Gonzalez, Jose Luis and Motchenkova, Evgenia and Nevrekar, Saish, Mergers and Innovation Portfolios (December 6, 2019). Tinbergen Institute Discussion Paper 2019-085/VII, Available at SSRN: https://ssrn.com/abstract=3500382 or http://dx.doi.org/10.2139/ssrn.3500382