Killer Acquisitions and Beyond: Policy Effects on Innovation Strategies
University of Zurich, Department of Economics, Working Paper No. 358
49 Pages Posted: 29 Sep 2020
Date Written: August 2020
This paper provides a theory of strategic innovation project choice by incumbents and start-ups. We show that prohibiting killer acquisitions strictly reduces the variety of innovation projects. By contrast, we find that prohibiting other acquisitions only has a weakly negative innovation effect, and we provide conditions under which the effect is zero. Furthermore, for both killer and other acquisitions, we identify market conditions under which the innovation effect is small, so that prohibiting acquisitions to enhance competition would be justified.
Keywords: Innovation, killer acquisitions, merger policy, potential competition, start-ups
JEL Classification: O31, L41, G34
Suggested Citation: Suggested Citation