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

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: August 2020

Abstract

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

Letina, Igor and Schmutzler, Armin and Seibel, Regina, Killer Acquisitions and Beyond: Policy Effects on Innovation Strategies (August 2020). University of Zurich, Department of Economics, Working Paper No. 358, 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

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