Competition and Innovation: The Breakup of IG Farben

83 Pages Posted: 30 Aug 2022

See all articles by Felix Poege

Felix Poege

Boston University - Technology & Policy Research Initiative; Max Planck Institute for Innovation and Competition ; IZA Institute of Labor Economics

Multiple version iconThere are 2 versions of this paper

Date Written: August 24, 2022

Abstract

The relationship between competition and innovation is difficult to disentangle, as exogenous variation in market structure is rare. The 1952 breakup of Germany’s leading chemical company, IG Farben, represents such a disruption. After the Second World War, the Allies occupying Germany imposed the breakup because of IG Farben’s importance for the German war economy instead of standard antitrust concerns. In technology areas where the breakup reduced concentration, patenting increased strongly, driven by domestic firms unrelated to IG Farben. An analysis of patent texts shows that an increased propensity to patent does not drive the effect. Descriptively, IG Farben’s successors increased their patenting activities as well, and their patenting specialized relative to the pre-breakup period. The results are consistent with a breakup-induced innovation increase by the IG Farben successors, which then spilled over to the wider chemical industry.

Keywords: Innovation, Competition, Merger, Antitrust, IG Farben

JEL Classification: O31, L44, N44

Suggested Citation

Pöge, Felix, Competition and Innovation: The Breakup of IG Farben (August 24, 2022). Boston Univ. School of Law Research Paper No. #22-24, 2022, Available at SSRN: https://ssrn.com/abstract=4199672 or http://dx.doi.org/10.2139/ssrn.4199672

Felix Pöge (Contact Author)

Boston University - Technology & Policy Research Initiative ( email )

Boston, MA 02215
United States

Max Planck Institute for Innovation and Competition ( email )

Marstallplatz 1
Munich, Bayern 80539
Germany

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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