Killer Acquisitions and Beyond: Policy Effects on Innovation Strategies

University of Zurich, Department of Economics, Working Paper No. 358, Revised version

72 Pages Posted: 29 Sep 2020 Last revised: 26 Oct 2021

See all articles by Igor Letina

Igor Letina

University of Bern - Department of Economics

Armin Schmutzler

University of Zurich - Department of Economics; Centre for Economic Policy Research (CEPR)

Regina Seibel

University of Zurich

Multiple version iconThere are 2 versions of this paper

Date Written: October 2021

Abstract

This paper provides a theory of strategic innovation project choice by incumbents and start-ups which serves as a foundation for the analysis of acquisition policy. We show that prohibiting acquisitions has a weakly negative innovation effect. We provide conditions determining the size of the effect and, in particular, conditions under which it is zero. We further analyze the effects of less restrictive policies, including merger remedies and the tax treatment of acquisitions and initial public offerings. Such interventions tend to prevent acquisitions only if the entrant has sufficiently high stand-alone profits.

Keywords: Innovation, killer acquisitions, merger policy, potential competition, start-ups

JEL Classification: O31, L41, G34

Suggested Citation

Letina, Igor and Schmutzler, Armin and Seibel, Regina, Killer Acquisitions and Beyond: Policy Effects on Innovation Strategies (October 2021). University of Zurich, Department of Economics, Working Paper No. 358, Revised version, Available at SSRN: https://ssrn.com/abstract=3673150 or http://dx.doi.org/10.2139/ssrn.3673150

Igor Letina (Contact Author)

University of Bern - Department of Economics ( email )

Schanzeneckstrasse 1
Bern, CH-3001
Switzerland

Armin Schmutzler

University of Zurich - Department of Economics ( email )

Zürich, CH-8006
Switzerland

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Regina Seibel

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
336
Abstract Views
923
rank
115,209
PlumX Metrics