Mergers and Demand-Enhancing Innovation

55 Pages Posted: 14 May 2021

See all articles by Marc Bourreau

Marc Bourreau

Telecom ParisTech

Bruno Jullien

University of Toulouse 1 - Toulouse School of Economics (TSE); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Yassine Lefouili

University of Toulouse 1 - Toulouse School of Economics (TSE)

Date Written: April 1, 2021

Abstract

We study the impact of horizontal mergers on merging firms’ incentives to invest in demand enhancing innovation. In our baseline model, we identify four effects of a symmetric merger on these incentives: the innovation diversion effect, the margin expansion effect, the demand expansion effect, and the per unit return to innovation effect. We offer sufficient conditions for a merger to reduce or raise merging firms’ incentives to innovate in the absence of spillovers and efficiency gains in R&D, and find that a comparison between the innovation diversion and price diversion ratios is informative about the impact of a merger on innovation.

JEL Classification: D43, L13, L40

Suggested Citation

Bourreau, Marc and Jullien, Bruno and Lefouili, Yassine, Mergers and Demand-Enhancing Innovation (April 1, 2021). CEPR Discussion Paper No. DP16031, Available at SSRN: https://ssrn.com/abstract=3846118

Marc Bourreau (Contact Author)

Telecom ParisTech ( email )

46, rue Barrault
Paris Cedex 13, F-75634
France

Bruno Jullien

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Yassine Lefouili

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

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

Paper statistics

Downloads
0
Abstract Views
79
PlumX Metrics